Bloomberg Surveillance TV: October 19th, 2026

Peter Tchir · Academy Securities

Compute-bond weakness could spread through credit and drag equities down; liquidity may not hold.

Tchir cites Treasuries widening about 70 basis points over a month, with sovereign yields in France, Italy and Spain moving sharply in two days, as evidence that the speed and size of moves is the concern. He says corporate credit has held so far but the problems are isolated to some compute names. His fear is that a trickle of selling becomes a wave the market lacks liquidity to absorb, which would drag everything down. He notes high-yield selloffs often start in EM, when investors sell higher-priced bonds to raise cash. He says that the corporate credit spread is the key variable for the next few weeks, and that if leakage shows up there he does not see how equities do well.

“my fear is all of a sudden that trickle of selling becomes a bucket getting dumped and the market doesn't have that liquidity and that's when it drags everything down.”at 3:01

Peter Tchir · Academy Securities

AI compute buildout faces funding, ROI and first-mover risks that pressure markets.

Tchir frames the AI compute trade around three risks: whether companies can fund the spending, whether the technology delivers the benefits advertised (citing stories of companies paying people to fix AI deployments), and whether today's first movers will still lead in five years. He says all three put pressure on the market, and he connects the funding question to the compute bond market, where he suspects investors may demand higher pricing for the risk of the spending.

“I think there's three distinct stories. One is the funding there. Can they spend it? Two is does it actually work as well as advertised?”at 3:48

Peter Tchir · Academy Securities

Global decoupling is real, which makes strong global equity valuations hard to achieve.

Tchir points to a week of deglobalization, citing a possible outage of Starlink or Starshield that would have been a huge story, and a response in Europe. He sees this as a real global decoupling and says that under those conditions he does not see how global valuations do well.

“So I think this global decoupling is real and that I don't see how you do well on global valuations”at 5:16

Peter Tchir · Academy Securities

Leveraged ETF flows into chips amplify moves, so chip stocks swing mechanically with money flows.

Tchir argues there is a lot of mechanical trading in chip stocks because of the amount of leveraged ETFs holding them. Every dollar flowing into chips is funneled into those leveraged funds, and the same happens in reverse. He says this is why the sector fell so hard when money left, and it means price moves are driven by flows as much as by news.

“I do think there's a lot of mechanical trading. When I look at these chip sector in particular, the amount of leveraged ETFs into that, so every dollar that goes into chips winds up funneling all these.”at 5:44

Peter Tchir · Academy Securities

Equities likely fall further as credit weakness drags them down; bonds unlikely to offset the decline.

Tchir says the market will be driven by whether corporate credit spreads tighten or leak wider over the next few weeks. He expects compute bond yields to widen, which drags stocks down, and he doubts that a relief rally in bonds would help equities because the equity story depends on growth. He notes earnings have usually produced rallies on backlog news in the past two years, but says it will be harder this time because the questions about AI spending remain. His conclusion is that there is more downside.

“I think at some point you see bonds do okay and it all falls on the equity so I think there is more downside.”at 7:48

Peter Tchir · Academy Securities

The EU's structure is failing, but defence and tech spending may push Europe to grow out of it.

Tchir argues that the EU was built on a rules-based structure of equal votes and veto rights, and that it now handcuffs France and Germany as their economies struggle. He expects more friction and expects countries to push against their debt ceilings. He also thinks spending will be directed toward self-reliance, including satellites, AI and compute, which could let Europe grow its way out rather than just galvanize politics. He says the EU is lazy, citing bonds that disappeared once calm returned, but he is not worried about an economic collapse and sees this as the early stage of countries pursuing growth.

“to me, the construct of the [EU] is kind of a failing construct.”at 8:05

Peter Tchir · Academy Securities

European banks are in strong shape and can support the capital needed for growth.

Tchir says the banks are in a strong position and have grown well, pointing to the stock prices of those banks as evidence. He uses this to argue that the capital markets can support Europe's spending and that the credit stress is more a higher cost than a systemic threat.

“I think the banks are in really strong position there. I think the banks have grown really well. You look at the stock price of those banks.”at 9:46

Jessica Taylor · The Cook Political Report with Amy Walter

Democrats are poised to gain Senate and House seats and governorships, driven by Trump's sagging approval.

Taylor says North Carolina's Senate seat is going to flip to Democrats because Republicans have effectively conceded it. Maine and possibly Texas are the next most likely to flip, and the majority hinges on Alaska, Ohio, Iowa and Kansas. The races are being fought in double-digit Trump states, where Trump's margin has shrunk from about 13 points to 16 points, reflecting a fall in his approval. She attributes the Republican decline to the economy, the war in Iran, and high gas and diesel prices, which have left voters fed up with the cost of everything. Democrats are poised to pick up governorships for the first time since 2010, and she expects the House to be the more certain outcome. Her forecast for the Senate is two to six seats, and for the House nine to nineteen seats. She expects gridlock afterward, as Democrats constrained by the presidency would produce mostly rhetoric heading into 2028.

“For the senate right now, we say between two and six seats. On the house, we have between nine and nineteen seats.”at 14:49

Aditya Bhave · Bank of America

The Fed could hike in October despite low market pricing, testing whether Warsh is serious.

Bhave argues the consensus that this is the same dovish Fed is strong, but the market has priced in only four or five basis points for a hike six days before the midterms. He cites a CPI number that was bad at the top line and in the details, which briefly lifted the odds of an October hike to about 60% before core CPI news reversed it. He says that if Warsh, who has promised a sea change at the Fed and does not want to guide markets, follows through, a hike would be a strong signal that he runs the show. Not hiking would risk the market concluding that the Fed is not serious about dropping forward guidance. He is open to the idea that the Fed will not go in October, and says the consequences of not hiking include a press conference that sounds too dovish.

“Warsh said he's going to bring a sea change to the Fed... what if he does that's our question that's the perspective that we're offering what if he's serious”at 18:51

Aditya Bhave · Bank of America

If the Fed delays hiking, core PCE could climb back to 3.4% by year-end.

Bhave says monetary policy works with long and variable lags, so delaying the second hike to December would still leave time for inflation to build. He points to a deglobalizing world where goods inflation is pushing up, and notes that when goods run at 1% it is very difficult to hit 2%. Inflation expectations are also drifting up in survey measures, including UMich and the New York Fed indicator, while market-based expectations look fine. On that basis, core PCE could plausibly be back at 3.4% by the end of the year.

“if you delay the second hike to December... by the end of this year plausibly core [PCE] could be back to 3.4%.”at 23:20

Aditya Bhave · Bank of America

Wage inflation is the Fed's comfort today but could become a risk if unemployment falls below 4%.

Bhave says wages are the one thing giving the Fed solace, but the trend in wages has been down for a long time. He says wages could take off if unemployment falls below 4%, hiring picks up and layoffs stay low. He notes he has seen hiring signs around the city that he had not seen since 2022, but the view is still kept in the risk space. If wages did inflect, the Fed might need to go beyond risk-management hikes toward a path back to 5%, but he says they are not there yet.

“wage inflation is probably the one thing that's giving the Fed solace... I think is the unemployment rate falling below 4%”at 23:54