October Jobs and Tech Selloff

Anthropic

Across the shows: 108 speakers in other episodes, 135 bullish and 89 bearish calls, past 30 days

• Max Kettner · HSBCBullish

  Anthropic should go public now at a reasonable valuation, since AI demand remains strong.

  Kettner calls the Anthropic IPO the key near-term event risk for year-end. Asked whether Anthropic should list despite the uncertainty, he says yes, but at a reasonable valuation. He warns that squeezing the primary price could leave the stock falling 20 to 30% on day one. A moderately priced IPO that trades up in secondary trading would, in his view, support sentiment and show that AI demand is still there.

  “I definitely would... I would say come to market, but actually make it a reasonable valuation. Don't try to squeeze it out.”at 43:14

Taiwan Semiconductor Manufacturing Company

Across the shows: 7 speakers in other episodes, 7 bullish and 0 bearish calls, past 30 days

• Anthony Stephens · BloombergUncertain

  TSMC's structural re-rating may not hold, since its visibility ends around 2028 and pricing could reverse.

  Stephens says the market had been pricing chip names like TSMC, Samsung and SK Hynix as structurally changed earners of large cash flows, not cyclical plays. TSMC is booked out through 2027 and 2028. He warns that if the data-center demand outlook changes, that visibility disappears. With no visibility in 2028 and 2029, the stock could fall off a cliff after the order book runs out, and the old linear mean-reversion model could return.

  “Once you come off that cliff, though, if the [demand] kind of vision of data centers changes, the pricing of that visibility disappears.”at 49:36

Market sentiment, positioning & volatility

• Max Kettner · HSBC

  Fast-money accounts are in full liquidation mode, driving the current selloff.

  Yesterday's moves were equally puzzling, but the market is probably in full liquidation mode in terms of fast-money accounts. That forced selling is what is driving the sharp swings rather than fundamentals, which is consistent with his view that the narrative, not the data, is moving prices.

  “we're probably more in liquidation mode, full on liquidation mode right now in terms of fast money accounts.”at 37:10

• Max Kettner · HSBC

  Contrarian sentiment signals are still not triggered; full neutral sentiment is needed before a bull market is confirmed.

  Kettner says he needs to see sentiment and positioning reset before reaffirming a bull market. Some of his contrarian signals are still flashing. At a minimum he wants sentiment back to fully neutral, with a couple of bullish-contrarian signals triggering. He reads the broad flush-out and the VIX inversion as capitulation that is a good sign, but he has not yet seen the full reset.

  “At the bare minimum, we want a full on neutral sentiment and perhaps a couple of biased signals triggering.”at 42:01

• Anthony Stephens · Bloomberg

  Local retail in Korea and Taiwan is buying the AI selloff, while foreign professionals have been right to sell.

  Stephens says the bid in Asia comes from local retail, which is buying all the way down. He calls them true believers in the AI story in Korea and Taiwan, and says they bought about $5 billion of stock from foreigners in one day and $250 billion year to date. He says retail has been wrong throughout the decline, while professionals were right. Hedge funds were forced to exit positions at the open. Taiwan opened down 9% and Korea was halted for 20 minutes before local buyers stepped in.

  “the bid in Asia is coming from local retail... They are true believers in the AI story out in Korea and Taiwan. They will buy all the way down... The bad news is they've been wrong all the way down.”at 45:01

• Anthony Stephens · Bloomberg

  Investor anxiety has shifted from fear of missing out to fear of finishing the year down.

  Stephens contrasts June and July, when there was heavy greed, volatility spiked, and investors launched triple-levered ETFs, with the current mood. He says blue-chip hedge funds such as Aspect, Lone Pine, D1 and Walleye are close to flat or down on the year. Lone Pine-style funds lost 11% in October and are down double digits again two weeks into November. He reads that as the shock behind the forced unwinding, not a fear of missing out on gains.

  “Now we have fear of being down on the year. That is much more important than fear of missing out... People are concerned about being flat on the year.”at 46:31

US jobs & labor market

• Claudia Sahm · New Century Advisors

  Wages are not outpacing inflation; rising benefit costs leave little for take-home pay gains.

  Inflation picked back up after the Middle East conflict began, while wage growth has slowed, especially in what reaches paychecks. The employment cost index also includes employer benefit costs such as health insurance, which are rising considerably. Employers that absorb those costs do not pass them on in wages, so workers are not getting ahead in an inflation-adjusted sense.

  “Not not in an inflation adjusted sense, particularly this year... and we've seen on the the wages side some slowing, particularly in what goes home to people's paychecks.”at 2:34

• Claudia Sahm · New Century Advisors

  Sub-100,000 monthly payroll growth is the new normal, driven by labor supply shifts.

  Payrolls have averaged a little under 70,000 since the start of the year. Upside surprises in the hundreds of thousands did not hold, and the latest month was under 30,000, but monthly figures have stayed stable around that average. That is a big improvement over the scary numbers at the end of last year. The earlier 100,000-200,000 averages reflected larger labor force growth. Big shifts in immigration policy and an aging workforce now pull the average down, so a single good month would not pull it back up to those levels.

  “So, yes, I think so, at least for now. And it's true, since the beginning of the year, payrolls have averaged a little under 70,000.”at 3:58

• Claudia Sahm · New Century Advisors

  Labor market has head-faked on acceleration several times; needs more strong months to confirm.

  Strong payroll surprises have appeared earlier this year and then faded. The unemployment rate ticked down with participation rising, which is good news, and layoffs are low, but she needs several months of this strength before she is convinced the labor market is accelerating.

  “we've seen some big surprises like this earlier in the year and then they ebb away. So I've got to see some months of this before I'm really convinced we're seeing an acceleration of the labor market.”at 9:37

US inflation

• Constance Hunter · Economist Intelligence Unit

  Current US inflation is cost-push rather than demand-pull, so the Fed is trying to curb it.

  Runaway demand-driven inflation is the outcome to avoid, and the wages data here show mostly cost-push pressure. The Fed is trying to curb it, and Fed officials such as Barkin have been calling for hikes.

  “we don't wanna see runaway inflation that's demand pull. And so what we see here is a lot of cost push inflation, and the Fed is trying to to curb that.”at 15:51

• Stephanie Roth · Wolfe Research

  Inflation falls back to about 2.5% in 2027 as energy and one-off tariff effects roll off.

  Energy prices will not repeat this year's year-over-year surge, and oil may come down sustainably, which produces disinflation on a year-over-year basis. Items elevated this year because they were largely one-off, such as airfares and tariff effects, will fade. That leaves inflation at about 2.5%, higher than the Fed would like but more tolerable.

  “Energy prices are not gonna repeat... you're gonna have the tariffs, roll off the data... we're looking for at two and a half percent inflation, which is certainly higher than what the Fed would like.”at 30:45

• Tony Crescenzi · PIMCO

  Goldilocks growth and falling shelter and labor costs point to disinflation through 2027, helping bonds.

  Crescenzi says PIMCO's base case for 2027 is Goldilocks, with growth in line with potential, which should bring significant disinflation. Wage growth of 3.1% year over year is running against this week's productivity gains. Unit labor costs are up only about 2%, consistent with 2% inflation. Housing is weak, and Zillow's rent index is below pre-COVID levels, which should moderate the shelter-heavy CPI and contribute to disinflation next year.

  “just right economic growth should lead to the disinflation story, especially when looking at the wage figure from today, 3.1% gain year over year”at 55:01

US consumer

• Constance Hunter · Economist Intelligence Unit

  US consumer is okay, but the outlook depends on the Iran war and gas prices.

  The consumer is holding up, but the key swing factor is the Iran war and gasoline prices. Oil is being moved out of the Gulf under costly escort operations, and the oil market prices in those risks. A resolution would bring oil prices down and give people immediate relief at the pump.

  “I think the consumer is okay, and a lot of it is going to depend what does happen, for example, with the Iran war and with gas prices.”at 17:16

• Stephanie Roth · Wolfe Research

  Spending stays robust as top spenders mask softness at the bottom, tied to nominal income growth.

  The lower end of the consumer has been much more challenged than others, but spending by higher spenders has stayed persistently strong and masks that softness. Spending is largely a function of nominal income growth, which depends on how many people are working and how much they are paid. Those trends are moving positively, so spending should remain fairly robust.

  “The bottom end of the consumer has certainly been a lot more challenged than everybody else. But because the strength has been persistent across the spenders that spend more, it's been masking any softness.”at 33:49

• Tony Crescenzi · PIMCO

  Roughly $5 trillion in stock-driven wealth loss could hit spending if sustained, but the consumer is strong.

  Crescenzi estimates about $5 trillion of wealth destroyed in the recent selloff. Household net worth rose about $50 trillion over the last five years, to $96 trillion, which is why the loss looks small against that backdrop. He applies the usual rule of thumb that each dollar of wealth change moves spending by 3 to 5 cents. That implies a potentially large hit to spending if the decline is sustained. He notes the consumer has been strong, so he sees the impact as limited for now.

  “it's about $5,000,000,000,000 of wealth destroyed... you're looking at a potential big hit to spending if it's sustained, but it's already... It's been pretty strong.”at 53:43

US rates & the Fed

• Kristina Campmany · Invesco

  Base case is a Fed hike in December; recession fears are overdone.

  The Fed chair avoids forward guidance, but the rest of the committee is giving it, and the messaging changes meeting to meeting. Had the Fed signaled the hike ahead of the last inflation prints, it would have gone in October too. She is skeptical of the view that there are real recession fears and that AI is over, so the base case remains a December move.

  “So I think there are people out there that think, like, there are real recession fears... We're a little skeptical of that. I think the base case is still that the Fed is going to go in December.”at 22:25

• Stephanie Roth · Wolfe Research

  Fed hikes in December, then once more around March 2027, before going on hold.

  Base case is a December hike, provided financial markets hold up. The Fed has communicated that it wants to hike again and the data have been firm. A further hike is likely at the March meeting. Once inflationary pressure subsides and activity cools modestly, the Fed can wait and see and remain on hold for quite some time. Markets have been pricing those odds down over concerns about AI.

  “So base case, they they still go in December... Then we think they'll probably go once more at the beginning of next year... probably at the March meeting. And then... they'll be kind of on hold.”at 32:54

• Tony Crescenzi · PIMCO

  The Fed is in risk-management mode to bring inflation back to 2%, and could hike again in December or Q1.

  Asked whether the Fed could hike in December, Crescenzi says a further hike in December and potentially another in the first quarter is possible. He stresses that a lot could happen first. He sees the Fed managing risk to bring inflation down to its 2% target, after more than five years of missing it. He expects the incoming chair to pursue the same course.

  “What we believe this is occurring now is the Fed is in the midst of a risk management exercise to ensure that the inflation rate moves downward toward the 2% target having missed on it for more than five years.”at 56:01

US growth & recession risk

• Constance Hunter · Economist Intelligence Unit

  Surge in cyclical hiring signals underlying economic momentum, though it may take time to feel.

  Earlier in the cycle, headline job gains were dominated by noncyclical health care, government and social assistance hiring. Starting this year, cyclical jobs are dominating hiring, which suggests underlying economic momentum. The effects may take time to be felt, but the trend is in the data.

  “we can see a surge in in cyclical jobs... cyclical jobs [are] dominating the hiring. That suggests that there's some underlying economic momentum.”at 15:51

• Stephanie Roth · Wolfe Research

  Nominal GDP growth slows to about 4.5% in 2027, led by real growth rather than inflation.

  The economy is buoyant and nominal growth will run slightly below recent levels, to about 4.5% in 2027. Growth is increasingly driven by real activity rather than inflation. The economy is on firm footing beyond the AI capex space, and this year's mix was distorted by inflation running hot for various reasons.

  “I think it will be slightly less than where we've been running. You're probably talking more like a four and a half percent nominal GDP for '27 as opposed to something that's notably higher.”at 29:56

Credit markets

• Kristina Campmany · Invesco

  Most cautious on credit because spreads are still historically tight.

  Of the three levers in the portfolio, FX, rates and credit, credit is where they are most cautious. Spreads have widened somewhat but remain tight by historical standards, and that remains their bias.

  “We've been the most cautious on credit just because of how historically tight we are. I think that still kind of remains our bias.”at 27:13

• Tony Crescenzi · PIMCO

  Short-dated commercial paper yields about 40 basis points over repo, beating money-market funds.

  Crescenzi explains that regulated money-market funds are limited to very safe, very short instruments under 60 days. PIMCO can go further into commercial paper with maturities of a few months, with the repo rate around 3.8%. Commercial paper, which is short-term debt issued by companies, yields about 40 basis points above that. Short-dated corporate bonds also cheapen versus Treasuries during periods of stress, which gives investors who have done the research on the companies a chance to pick up yield.

  “the commercial paper rate, this is, this debt is short term debt issued by companies, is about 40 basis points over that.”at 57:38

AI & jobs

• Claudia Sahm · New Century Advisors

  AI productivity gains are too hard to sustain to carry long-run US growth; labor force matters more.

  She is optimistic about upcoming technology improvements, but it is hard to string together quarter after quarter and year after year of productivity growth. Without a growing labor force it will be hard to sustain strong GDP gains, so policy needs a multi-pronged approach rather than relying on AI.

  “I am optimistic about some of our technology improvements on the horizon, but that is really tough to string together quarter after quarter, year after year improvements in productivity growth... Hanging our hats on AI is not the way to go.”at 11:35

Oil & fuels

• Constance Hunter · Economist Intelligence Unit

  Oil prices fall only if an Iran resolution leads to a durable structure for Hormuz flows.

  Oil is leaving the Gulf under escort operations, which is very expensive, and the market is pricing in all of those risks. If the Iran war is resolved and a durable structure for moving oil and gas out of the Strait of Hormuz is built, oil prices should come down, giving immediate relief to households.

  “If we see a resolution to the Iran war... And you see a really durable structure built around getting oil and gas out of the Strait Of Hormuz, then you're going to see oil prices come down.”at 17:16

US Treasuries & yields

• Kristina Campmany · Invesco

  The 40-50bp Treasury rally from the peak looks overdone, driven by positioning and AI fears.

  Yields drifted higher all year and peaked five or six weeks ago. Since then they have retraced 40-50 basis points across the curve. She thinks some of the move reflects positioning and some reflects fear about AI, but the underlying fundamentals have not changed much, so the rally feels overdone.

  “we kind of got the peak five or six weeks ago, and for five or six weeks, we've retraced 40, 50 basis points... It feels a bit overdone. I think some of that was positioning.”at 21:42

AI infrastructure & data centers

• Kristina Campmany · Invesco

  Cautious on hyperscaler bond issuance as massive 2027-29 capex questions the build-out pace.

  CapEx has been the main driver of US growth this year. Investors are grappling with huge capex plans for 2027, 2028 and 2029, and the question is whether the debt pipeline changes the speed of the build-out. Her firm has been cautious on some hyperscaler issuance and so did not participate in the Meta offering, although deals are still being done.

  “We have been a bit cautious on some of the hyperscaler issuance, so we were not involved.”at 23:09

US dollar

• Kristina Campmany · Invesco

  Still negative on the dollar; broader weakness needs Asian currencies like the yen to join.

  They remain a bit more negative on the dollar, but the dollar's decline has been challenged. Broader dollar weakness needs participation from Asia. They want to see Asian currencies resume their move lower, with the yen finally strengthening and Korea coming back to the table, before a broader FX rally is confirmed.

  “we still are a bit more negative, the dollar, but that has been a bit challenged... I think you need to see Dollar Asia resume lower. So the likes of the yen finally participating and strengthening.”at 24:16

International equities

• Kristina Campmany · Invesco

  Europe offers more value than the US, though its underlying growth is weaker.

  The rally in US assets has been led by the US more than the rest of the world, so they still see value in developed markets outside the US. Europe has more value, reflecting a weaker underlying growth system.

  “We think Europe has probably more value. There's a kind of weaker underlying growth system.”at 24:51

AI: overall outlook

• Kristina Campmany · Invesco

  AI theme will not fade over the election or equity wobble; pace and implementation may change.

  The AI theme is not going away because of the election or an equity wobble. The pace may slow and the way it is implemented may change, but the shift is visible in how their own jobs are changing over the last six months and is not stopping on a dime.

  “the theme of AI is because of the election or because of a wobble in the equity markets, is not going away. Right? The pace may slow down, the way it's implemented may change”at 28:21

Tariffs & trade policy

• Stephanie Roth · Wolfe Research

  Tariffs stay elevated for quite some time; revenues are too high to cut, even under a Democrat.

  Tariff policy is largely unchanged because the revenues are too high to justify adjustments from a fiscal perspective. Even if a Democrat wins in 2028, tariffs may be reduced only on a targeted basis. Tariffs will remain elevated for quite some time because trimming them is unattractive from a deficit perspective.

  “I think the tariff policy is largely unchanged. The revenues are kind of too high to really make any adjustments from that perspective. So tariffs are gonna remain.”at 31:50

US elections & politics

• Max Kettner · HSBC

  Market swings on the midterms are narrative retrofitting; he was skeptical midterms would clear risk.

  The almost 250-point swing from the Asia session into the US session on Wednesday was surprising. The market retrofitted a narrative about why a blue sweep is not that bad, after expecting the midterms to be the risk-clearing event. He and his team were skeptical of that view from the start, so Wednesday's move looked puzzling to them.

  “I've been quite surprised, to be honest, about the rips that we had... and that sort of retrofitting of the narrative why the blue sweep isn't really that bad... We've been pretty skeptical about that.”at 36:41

AI bubble & tech valuations

• Max Kettner · HSBC

  S&P tech now trades at a discount to the overall market after heavy de-rating, limiting contagion risk.

  Kettner points to widespread multiple compression since the start of the year, and since May, in both tech and US equities. Many S&P 500 and Nasdaq stocks are now well off their highs. He says S&P tech is cheaper than the overall market, so the damage is largely done. He argues contagion is less likely now than it was three or four months ago because valuations have already been reset.

  “We're now cheaper in S and P tech than the overall market. It's trading at a discount... I think we've derated so much now already.”at 38:31

US stock market outlook

• Max Kettner · HSBC

  Staples at over 24x earnings versus tech near 16x makes no sense; the defensive rotation will unwind.

  Kettner says the market is buying defensive consumer staples as a safe haven, with Costco up almost 25% in a couple of weeks. He cites staples trading above 24 times earnings while tech trades near 16 times. He argues this makes no sense in a world of tariffs and higher energy prices, and that the rotation into low-end-of-the-K consumer exposure will reverse. He frames the open question as one of timing.

  “Staples now traded over 24 times earnings and tech trades at what? Almost 16. That doesn't make sense... It's a point of timing now when we unwind that.”at 38:53