Markets, Earnings, and Oil — Bloomberg Surveillance

PodcastBloomberg SurveillanceEd YardeniOct 13

Yardeni describes a resilient U.S. economy, argues that current interest rates are normal rather than unusually high, and sees productivity growth potentially accelerating, while warning that geopolitical risk could challenge his optimistic outlook. He also points to signs of deflation and unresolved bad loans in China, and says AI financing is showing credit-market excesses. Separately, market commentary focuses on small-cap valuations, oil and refinery risks, constrained diesel supply, and the possibility of an S&P 500 pullback; the guest does not currently see the conditions for a deeper tier-two decline.

Economic Growth Interest Rates China AI Infrastructure Private Credit Oil

Preview · 12 more points in the app

Read the Full Summary

Key Takeaways

Yardeni says the U.S. economy has remained resilient through shocks, with real GDP and stock-market levels at records and his “roaring ’20” scenario so far on track. His base case also expects productivity growth to rise from around 2% to 3%–4%, though he acknowledges that projection may sound “somewhat delusional.”

Yardeni characterizes current interest rates as “normal for longer,” citing the 4%–5% range before the Global Financial Crisis, and uses 6.3% nominal GDP growth as one guidepost for assessing bond yields. He also says listeners could infer the Fed’s rate outlook from officials’ speeches even without the dot plot.

Yardeni describes China’s historically low bond yields as occurring amid deflation, pointing to zero nominal and real retail sales growth and falling home prices. He says folding rural banks into larger ones did not resolve bad loans and argues that China still needs to restructure its credit system.

GEO-POLITICS

2030s Risk — Yardeni warns the 2030s could resemble the 1930s, a period of geopolitical crisis that led to World War II. He frames this as a risk to his otherwise optimistic outlook, not a definite prediction.

“However, the problem with the twenty thirties is they rhyme with the nineteen thirties, and that was a period of horrible geopolitical crisis that led to World War two…”—

TECHNOLOGY

Family AI Assistant — Fambot’s founder describes an AI assistant that reads family-related emails and communications, distills key information into a nightly text, and handles tasks through text chat. It initially focused on email, WhatsApp, and calendars, with more sports and extracurricular apps planned; the founder said it could not yet unsubscribe users from emails.

“So Fambot just reads family related emails and communications, and then it'll go line by line to memorize every important bit of family related information only, and then distill it…”—

ECONOMY

U.S. Resilience — Yardeni says the U.S. economy has performed well despite absorbing shocks since the start of the decade, citing record-high real GDP and stock-market levels. He says the “roaring ’20” scenario is so far on track, while acknowledging that issues remain.

“Real GDP all time record high. Stock market all time record high. So far so good. Just three more years…”—

Normal Rates — Yardeni argues that current rates are better described as “normal for longer” than “higher for longer.” As a historical reference for normal rates, he cites the 4%–5% range before the Great Financial Crisis, with occasional spikes above 5%.

“I don't think it's higher for longer. I think it's normal for longer. We're we're back to normal rates…”—

GDP Yield Guide — Yardeni says nominal GDP growth is one guidepost for assessing where U.S. bond yields should be. He puts that growth rate at 6.3%.

“Well, when it comes to The US, one of my guideposts for trying to figure out where bond yield should be is to look at the growth rate of nominal…”—

MARKETS

AI Credit Risk — Yardeni says speculative excesses tend to emerge in credit markets and that AI financing is showing such excesses. He sees a difference from the Global Financial Crisis: banks are less involved in the current excesses than they were then.

“That's where all the trouble usually starts…”—

Russell Valuations — The guest says Russell 2000 valuations had fallen to Iran-war lows but were not washed out: they were somewhat cheap, but not deeply compelling. She says Nasdaq futures positioning remained crowded and argues that additional rate hikes could weigh on small caps and the broader cyclical trade.

“And what we're seeing on that side of the equation is valuations have kind of gotten down to the Iran war lows but they haven't really gotten washed out…”—

U.S. Valuation — The guest says U.S. equities have moved slightly above their five-year average valuation relative to non-U.S. equities. She identifies this as one component of the broadening trade.

“Now that being said The US is looking pricey versus Non US, and that's another big component of the broadening trade…”—

FORECASTS

Productivity Outlook — Yardeni’s base case is that productivity growth will rise from around 2% to 3%–4%, a projection he acknowledges sounds somewhat delusional. He says that range is consistent with previous productivity booms and argues this boom may have more going for it.

“I mean, inflation is always an issue for forecasters. If you get it right, then you're going to get your portfolio working for you…”—

S&P 500 Tiers — The guest says her market call has been for a tier-one S&P 500 drawdown of 5%–10%, which could take the index to roughly 7,000–7,400. Tier two involves rising recession risk and a new problem spiraling out of control; she says she does not currently see the seeds of a tier-two pullback.

“And so if you think about my own market call right now, we've been looking for a five to 10% drawdown, what we call a tier one, you know, sort…”—

Rates Return To Normal

Yardeni calls current yields normal rather than unusually high, noting nominal GDP growth, attractive bond valuations and limited evidence of bond-market contagion beyond France.

China's Deflation And Bad Loans

Yardeni warns that China faces deflation, stagnant retail sales and unresolved bad loans despite bank restructuring, and questions whether its credit system can be repaired.

Productivity And The Roaring 2020s

Yardeni expects technology-led productivity to lift real growth and earnings, while acknowledging geopolitical risks and arguing that the U.S. economy has weathered past shocks.

Oil, Credit And AI Risk

Yardeni says the economy has proven resilient to oil spikes but cautions that speculative excesses are appearing in AI financing, though banks seem less exposed than before the financial crisis.

S&P Pullback And Small Caps

Calvasina anticipates a possible 5–10% S&P 500 pullback but sees no current trigger for a deeper decline, while noting small-cap valuations are only modestly cheap and rate risks remain.

Middle East Oil Supply Risks

Fraser explains that refinery damage could take considerable time to repair, shipping disruptions are difficult to measure, and constrained diesel supplies may limit the impact of released oil volumes.

Fambot's Family AI Assistant

Fambot's founder describes an AI assistant that organizes family emails, calendars and activities into daily plans, emphasizing privacy, parental control and time back for families.