Bloomberg Surveillance TV: October 29th, 2026

Mike Feroli · J.P. Morgan

Policy is not restrictive, given strong GDP and jobless claims data.

Feroli argues the Fed's policy is not restrictive. Strong GDP and low jobless claims mean the economy is not showing the weakness that restrictive policy would produce, so he finds it a hard case to make that policy is truly restrictive. He also notes consumer spending has held up despite questions about sustainability.

“It doesn't look that way. This morning's numbers wouldn't say it's all that restrictive, would it? When you look at the GDP numbers, the claims numbers. So I think it's a hard case to make that it's really restrictive.”at 3:36

Mike Feroli · J.P. Morgan

The September pause was defensible, but a hike had a strong case given hotter inflation.

Feroli says the pause was defensible, since Williams and others argued the transitory story has not fully faded and the inflation is supply-shock driven. He thinks there was also a strong case for a hike, because inflation data since the September meeting came in hotter than before it. If the Fed is data dependent, he asks why it is waiting, and says the chair did not make that case well.

“I think the decision to pause was defensible. I don't think we heard a great defense of why they didn't yesterday, but I think it was defensible.”at 4:43

Mike Feroli · J.P. Morgan

Dropping one meeting leaves a 12-13 week gap, and the framework-review rationale is unconvincing.

Feroli finds the Fed's rationale for cutting meetings unconvincing. The Fed has held eight meetings a year in past framework-review years, so the review does not require fewer. If the Fed keeps the current schedule and skips one meeting, the gap between active meetings becomes 12 to 13 weeks, which makes each remaining meeting more important for markets. He sees no urgent need for the change.

“Certainly we've had framework review conferences in years where they continue to have eight meetings per year and they were able to do the frame. So if that's the rationale, I didn't find that all that convincing.”at 8:30

James Bullard · Purdue University

The committee is on a quarterly pace; he favours two hikes, then a review.

Bullard believes the committee's decision was effectively made at the September meeting and that the committee implicitly had a quarterly pace in mind. Williams's view, which he thinks is popular, is that the Fed can wait until December and the next projections, then decide on 2027. Asked about his earlier call for two hikes, he refines it to two hikes and review, a view that implies two more increases before reassessing.

“I think maybe a little better wording would be two hikes and review.”at 21:33

James Bullard · Purdue University

Warsh's communication leans toward markets over committee, closer to Greenspan's style.

Bullard says Warsh harks back to Greenspan, which he appreciates, but that Warsh is trying to put more weight on markets and less on the committee. He thinks it is good for the market to understand where the committee stands, because that yields more accurate pricing. He also says the Fed should give markets a clear sense of its reaction function, and that the transparency shift began under Bernanke and cannot be reversed.

“He harkens back a little bit to Greenspan, which I can appreciate because I like Alan Greenspan, but a little bit more market and a little bit less committee, I think, is basically what he's trying to do.”at 23:05

Mike Feroli · J.P. Morgan

Term premia are higher than five months ago but not jumped; with $30T debt every basis point matters.

Feroli looks at most measures of term premia and finds they have not jumped materially, though they are higher than five months ago. He links the Treasury market to the debt load: with debt around $30 trillion, every basis point of yield matters. This frames his concern about long yields, which he says should be read against the uncertainty about the Fed's reaction function.

“I think if you look at most measures of term premia, they haven't jumped materially higher, but they are higher certainly than we were five months ago.”at 9:37

Gargi Chaudhuri · BlackRock

Intermediate bonds offer cushion: with 10-year yields above 5%, the belly loses less if rates rise.

With the 10-year above 5%, Chaudhuri says the bonds have a large cushion. Even if rates rise by 100 basis points over the next twelve months, an investor in the belly of the curve loses less than in other parts of the curve, and if rates fall, the position gains from positive convexity. Clients are moving into the front end and belly, and October saw the strongest month of inflows into fixed-income ETFs ever. Her summary is equities are great, bonds are greater, and bonds are back for income and ballast.

“Investors are telling us that at these level of fields, call it over 5% on the ten year point, you have so much cushion built in. And what I mean by cushion is that rates can go up in the next, call it, twelve months by a 100 basis points. And if you're in that belly, you don't lose as much money.”at 14:12

Mike Feroli · J.P. Morgan

Getting inflation back to 2% will be hard; below 3% is possible if supply shocks ease.

Feroli expects inflation to stay above 2%. Much of this year's goods inflation looks like residual pass-through from tariffs and higher energy prices. Services inflation still looks high, which makes 2% challenging. Wage pressures are not the problem, so inflation can get back below 3% if the adverse supply shocks stop. He argues that if inflation is mainly supply-driven, returning to 2% need not cause a big rise in unemployment, since core PCE fell from 5.5% to 3% without much pain.

“I think getting all the way down to 2% or within that vicinity may be challenging. Certainly, [I] think a lot of the inflation we saw this year, given that it is in goods, looks like it's the residual pass through from both tariffs and higher energy prices.”at 5:41

Gargi Chaudhuri · BlackRock

Earnings season shows about 30% growth and strong beats, though the market has not rewarded them.

Chaudhuri cites roughly 30% earnings growth in this season as a reason to be constructive on risk, alongside strong GDP. She notes that the earnings beats have been very strong, but says they have not been rewarded by the stock market so far.

“the earning season, 30% earnings growth, that's certainly another reason... obviously, of these tremendous beats, which I would say have not been rewarded so far to be clear.”at 13:06

Gargi Chaudhuri · BlackRock

Still like equities, favouring quality names with high returns on equity and strong free cash flow.

Chaudhuri still likes equities, especially with earnings season showing strength in parts of the market. Her preference is for quality: high return on equity and free cash flow matter in a higher-for-longer rate environment. Her case rests on a strong economy, with GDP growing in the mid-threes and nominal GDP above 6.5%, plus strong earnings. Strong beats have not yet been rewarded by the market.

“we still like equities, and especially when we see this earning season and we see the strength in certain parts of the equity market. Where we're thinking investors should go to is the quality part of the market.”at 14:12

Gargi Chaudhuri · BlackRock

Markets have historically rallied after midterms; investors should keep politics out of portfolios.

Chaudhuri tells clients to keep politics out of their portfolios. She acknowledges volatility around the election, but says that looking at the 1970s to now, markets have rallied in the final quarter after midterms, in November and December. History is not a guarantee, but she says earnings season makes this a good time to own certain equities and the intermediate bond market.

“when we look from nineteen seventies to now... is coming out of midterms that last quarter November December... in the past we've seen that markets have rallied. History is no predictor”at 15:31

James Bullard · Purdue University

The AI boom shows red flags on revenue, build-out pace and borrowing, and markets are starting to crack.

Bullard thinks the Fed would welcome some tempering of the AI boom. He lists several red flags: where the revenue will come from, how fast the build-out will proceed, and how much borrowing is going on. He says markets are starting to crack a little and are trying to calibrate where the boom goes next. He implies the Fed prefers smoother, less frenzied markets.

“I think there are many red flags that have been waving here about this, you know, where's the revenue going to come from, how fast this build out going to occur, what about all this borrowing going on... it is starting to crack a little bit”at 20:31