Bloomberg Surveillance TV: October 7th, 2026

PodcastBloomberg SurveillanceAlicia LevineOct 7

Levine sees higher rates as a headwind rather than a threat to the bull-market thesis, while warning that political resistance could slow data-center construction and affect earnings growth. Havana points to a reassessment of the neutral rate, rising Treasury yields, and early signs of pressure in some credit markets; he says rates may keep rising until data softens or financial conditions tighten. Watson highlights power, grid, and natural-gas infrastructure needs, along with higher energy transport costs and investment-cycle risks. The segment also reports SpaceX's planned $40 billion financing for NVIDIA chips and more than $20 billion in private-credit funding for the AI buildout in the third quarter.

Interest Rates AI Infrastructure Energy Markets Private Credit Corporate Earnings Market Valuations

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Key Takeaways

Havana says markets are reassessing the neutral rate and that rates may need to be higher: more than 50% of surveyed clients viewed US monetary policy as accommodative, while fewer than 10% called it restrictive, alongside record-high equities and tight credit spreads. He also notes the 10-year Treasury yield is up about 115 basis points year to date, with more than half of that rise since Jackson Hole.

Havana says higher rates are beginning to bite in US high-yield triple-Cs and European bonds, while the Fed’s overnight rate reaches housing, autos, and leveraged consumers; he cautions that rates may keep rising until data softens or financial conditions tighten. He frames the policy tradeoff as hiking or allowing a long-end bond-market overshoot that could cause disorderly moves and excessive tightening.

Levine says the broken stock-bond correlation since 2023 means bonds have not reliably offset stock volatility in the rising-rate environment. Her clients are positioned in short-to-intermediate maturities, which she considers safer given 6.3% nominal growth and pressure on the long end; extending duration would require betting on a halt to hikes and eventual cuts tied to a worse economic outcome.

Levine says narrow leadership has persisted since Jackson Hole, with small caps about 8% below their high while the Magnificent Seven and other established leaders have regained strength; she notes leadership can stay narrow for years, as it did in 2023 before broadening alongside a manufacturing recovery. She argues higher rates are a headwind, not a thesis breaker, and expects the race cycle to narrow leadership and raise volatility while earnings can keep the bull market intact.

GEO-POLITICS

AI Buildout Politics — Levine says political resistance could slow data-center construction, with governor races potentially making the issue salient in 2028. She argues that a modest slowdown could ease bubble concerns and extend the trade's longevity, while also affecting earnings growth. She describes the possible market effect as a correction and says she does not see a recession.

“I think what stops it really is the slowdown in the data center build out. And that's political and it's political across the spectrum…”—

TECHNOLOGY

Proven Energy Technologies — Watson says Apollo's investment underwriting favors technologies it knows work, particularly in power. She cites solar and batteries as proven technologies that can be brought to market quickly, and says the approach uses conservative assumptions about life cycle and pricing.

“And we're continuing to underwrite technologies and particularly on the power side that we know work. Solar batteries, like these are proven. These are quick to take to market…”—

ECONOMY

Neutral Rate Reassessment — Havana says markets are reassessing the neutral rate after a shift in Fed guidance, including the Fed chair's statement that he was hard pressed to describe financial conditions as restricted. In a client survey, more than 50% viewed US monetary policy as accommodative and fewer than 10% as restrictive. Havana argues that rates may need to be higher, pointing to equities at record highs and tight credit spreads.

“And worse said he was quote hard pressed to describe financial conditions as restricted…”—

How Rates Bite — Havana says rates may keep rising until macro data softens or financial conditions tighten. He sees possible early signs of rates biting in US high-yield, French, and Italian bonds. The Fed's overnight rate affects interest-sensitive areas such as housing, autos, and leveraged consumers; the rate needed to affect AI players could be well above current levels and could crush other parts of the economy.

“It's open for markets to find out where rates can go. And so off you go. And rates keep rising until, as you highlighted earlier, one of two things happens…”—

MARKETS

Narrow Market Leadership — Levine says narrow leadership has persisted since Jackson Hole: small caps have lagged while the Magnificent Seven and other long-time market leaders regained strength. Small caps are about 8% below their high. She argues narrow leadership can last for years, citing 2023, when 10 stocks led before leadership broadened alongside a US manufacturing recovery. The index did not surge during that later broadening, she adds, because capital shifted away from the market's top stocks.

“Oh, we've been seeing it really since Jackson Hole when when Walsh became unapologetically hawkish. He started to see the small caps underperform…”—

Stock-Bond Correlation — Levine says the stock-bond correlation has been broken since 2023, when markets moved from a zero-rate world into a rising-rate environment. Since then, bonds have not reliably offset stock volatility.

“So the correlation has been broken for a while, and it's been broken really since 2023 when we came from a zero rate world, right, very hard and in rate…”—

Shorter Duration Positioning — Levine says extending duration requires betting that the Fed will stop hiking and eventually cut rates because of a worse economic outcome. Her clients are in short-to-intermediate maturities, which she considers safer amid nominal growth of 6.3% and pressure on the long end.

“Essentially, if you're looking for capital return and if you're looking for, you know, to go out longer in duration, and we're having this conversation everywhere throughout the bank, should…”—

FORECASTS

Bull Market Outlook — Levine says higher rates are a headwind, not a thesis breaker. She argues earnings can keep the bull market intact and expects the race cycle to narrow leadership and raise volatility.

“Alicia Levine of BNY Wealth writing higher rates are a headwind, not a thesis breaker…”—

Bond Yield Threshold — One speaker says yields could reach 5.5%, making bonds more competitive with stocks. The speaker describes that level as consistent with normalization in an economy growing 2.5% to 3% with 3% inflation.

“What I'm getting at is at what point do bonds present a competitive alternative to stocks? On the number. On the number. Yeah…”—

Narrow Market Leadership

Levine says large-cap growth can sustain the market despite weakening breadth, while small caps, cyclicals, and some credit markets feel pressure from higher rates.

Treasury Yields And Stocks

Levine says bonds are not reliably offsetting equity volatility in this rate environment and sees yields near 5.5% as a more competitive alternative to stocks.

AI Buildout Political Risk

Levine argues that political resistance could slow data-center construction, temper earnings growth, and potentially extend the AI investment cycle by reducing bubble risks.

SpaceX AI Financing

The hosts report that SpaceX is pursuing a large financing package to buy NVIDIA chips, while Apollo and other private-credit firms fund AI infrastructure.

Neutral Rate Reassessment

Havana says markets are reassessing the neutral rate and Treasury yields may keep rising until data softens or financial conditions tighten, with early pressure emerging in credit.