Stocks, Bonds Fall as CPI Data Fuel Fed-Hike Bets

Micron Technology

Across the shows: 28 speakers in other episodes, 26 bullish and 16 bearish calls, past 30 days

• Cameron Dawson · NewEdge WealthBearish

  Micron's record gross margins are unsustainable, and they will fall sharply once they roll over.

  Cameron notes Micron's gross margin of about 86 cents per dollar, which reflects very strong semiconductor demand. She says those margins are not sustainable on historical patterns. The market expects margins to keep expanding, but for cyclical companies like Micron, once gross margins start to roll over they typically fall a lot, not a little.

  “history would show that once you start seeing gross margins to roll over for a cyclical company like Micron, they typically don't fall a little, they fall a lot.”at 23:11

Alphabet

Across the shows: 65 speakers in other episodes, 61 bullish and 42 bearish calls, past 30 days

• Cameron Dawson · NewEdge WealthBearish

  An Anthropic IPO will lift Alphabet's earnings far less than past Anthropic funding-round gains did.

  Cameron says that in the first half of 2026, mark-to-market gains on Anthropic and SpaceX stakes were a big driver of Amazon and Alphabet earnings. Those gains came from funding rounds that raised valuations. An Anthropic IPO at around $1.1T would still boost Alphabet's earnings, but by much less than the prior rounds, since the last raise was around $985B. She says investors should scrutinize 1Q and 2Q 2027 estimates.

  “So when Anthropic goes public, let's say it comes out at 1,100,000,000,000, that will be an uplift to somebody like Google, in their overall earnings. But the challenge you have is that that's not nearly as much as what we saw in the prior funding raises.”at 24:26

AI infrastructure & data centers

• Ajay Rajadhyaksha · Barclays

  The AI capex cycle, not traditional macro, is the main source of unexpected outcomes for markets.

  Ajay says monetary policy is fairly predictable right now, and client meetings rarely even mention the Fed chair. The real source of surprises is the AI capex cycle, which he says matters far more than conventional macro drivers for the outlook.

  “And the reason is because what happens with the AI CapEx cycle, which is where the unexpected comes in matters enormously more than traditional macro.”at 7:44

• Phil Neuhart · First Citizens Bank

  His fixed-income strategies avoid hyperscaler bonds and he is not comfortable holding their debt.

  Phil says First Citizens' fixed-income strategies have deliberately avoided hyperscaler bonds. The firm is cautious about hyperscaler credit and is instead emphasizing energy and financials within an investment-grade-only, fully invested credit book. This reflects concern about how hyperscalers are financing AI spending, including the scale of their debt issuance.

  “Sector specific, when you look at our our fixed income strategies, we've really avoided the hyperscalers.”at 8:44

• Ajay Rajadhyaksha · Barclays

  Hyperscaler bond issuance is exploding, with private issuance absorption rising to about $1.9T next year.

  Ajay estimates, on a 10-year-equivalent duration basis, that the US private sector must absorb about $1.6-1.7T of Treasuries and investment-grade bonds this year, including hyperscaler issuance. That rises to about $1.9T next year. Treasury duration absorption falls because buybacks ramp up next year, but hyperscaler issuance is growing by at least a factor of 1.5 next year, so it is exploding.

  “The US private sector will have to absorb about 1.6 to $1,700,000,000,000 in treasuries and IG, including the hyperscalers this year. Next year, that number goes up to about 1,900,000,000,000.”at 9:27

• Ajay Rajadhyaksha · Barclays

  Off-balance-sheet hyperscaler financing risks eventual compute oversupply and then serious problems.

  Ajay sees the main risk as massive overbuilding of compute, not a 2027 event. Each hyperscaler makes rational decisions on its own. Because much of the spending is moving off balance sheet, none can see what the others are building. That eventually leads to an oversupply of compute, which causes large problems.

  “The risk is, and I don't think, Tom, this is a risk for 2027, but the risk eventually is of massive overbuilding on the compute side because each individual hyperscaler thinks they are making rational decisions”at 10:50

• Elias Griepentrog · Yardeni Research

  AI build-out faces speed bumps from financial, political and physical limits, not roadblocks.

  Elias says investors have been too quick to price in a roadblock to the AI investment boom. Yardeni splits the build-out constraints into three groups: financial, political and physical. He argues these will be speed bumps rather than roadblocks, so the team is quite optimistic.

  “But we think there are going to be speed bumps on the path of the AI investment boom and not roadblocks. So we are quite optimistic.”at 31:53

US Treasuries & yields

• Ajay Rajadhyaksha · Barclays

  Higher Treasury yields this year reflect strong growth and sticky inflation, not US fiscal solvency worries.

  Ajay says that despite the talk about worsening Western fiscal positions, most of the rise in bond yields this year comes from an economy stronger than expected and stickier-than-expected inflation. Concerns about US fiscal solvency are not reflected in the 10-year yield.

  “the vast majority of the reason why bond yields are higher this year is simply because the economy was stronger than expected ... fiscal solvability is not remotely reflected in the tenure right now.”at 11:52

• Cameron Dawson · NewEdge Wealth

  Strong economic surprises would push Treasury yields higher from current support levels.

  Cameron says the 10-year and two-year yields are finding support at their 100-day moving averages, and hawkish comments from Waller are adding support to two-year yields. Yields have fallen partly because the 10-year rallied on equity weakness. The historical link between 10-year yields and economic surprises has broken down, but if surprises keep rising, that would push yields up.

  “But the reality is is if economic surprises continue to push higher, that puts upward pressure on [ten-year] yields.”at 28:29

• Elias Griepentrog · Yardeni Research

  The AI trade drives the 10-year yield, so if AI investment slows, Treasuries are the place to be.

  Elias says the biggest driver of the 10-year yield this year is probably the AI trade, shown by a strong correlation between the 10-year and the Nasdaq. If the AI investment boom slows, which he says is likely, economic activity would be suppressed. He argues bond yields, especially the 10-year, are the place to be. The 10-year reached a level that starts to take heat out of hot nominal GDP and tightened financial constraints on the AI build-out.

  “It turns out that the biggest driver of the ten year probably is the AI trade. ... So we think if you expect the AI investment boom to slow, which is likely then going to suppress economic activity, bond yields are the place to be.”at 34:59

US growth & recession risk

• Tiffany Wilding · PIMCO

  US demand is incredibly strong, led by consumption and AI build-out investment, though it will cool.

  Tiffany says US demand has held up through energy shocks, tariffs and other headwinds. Consumption is strong, and investment tied to the AI build-out has been very strong. She expects some cooling from the breakneck third-quarter pace in the fourth quarter and early next year. The Fed is concerned that demand is strong while inflation is stickier than it would like.

  “But, you know, I think what we're seeing is just that demand in The US economy, you know, is incredibly strong.”at 20:18

• Cameron Dawson · NewEdge Wealth

  She doesn't see a big drop in real GDP demand; a downgrade would signal risk-off.

  Cameron says real GDP demand is not falling off materially. Household consumption forecasts are higher now than before the war began, which suggests the energy shock is not causing households to pull back meaningfully. Offsets such as the OBBB tax law and the wealth effect are helping. Only if forecasts for 2026 or 2027 real GDP had to be cut would she see a more risk-off environment.

  “we don't see a big falloff in underlying real GDP demand. If that was the case, if we were thinking that we needed to cut forecast for '26 or 2027 real GDP, then it certainly would augur a more risk off kind of environment.”at 26:56

• Elias Griepentrog · Yardeni Research

  Economic resilience rests on a strong consumer, a resilient labor market, and business spending.

  Elias says Yardeni splits economic resilience into three pillars. The first is a strong consumer, supported by a resilient labor market and a wealth effect, with record Q2 net worth gains. The second is business spending, which remains resilient, and the AI investment boom, which will continue but at a slower pace. The third is government fiscal spending.

  “So we split this economic resilience in three pillars. You have a very strong consumer because of a labor market that is resilient because of the wealth effect.”at 34:00

Earnings & corporate profits

• Phil Neuhart · First Citizens Bank

  Earnings growth, not the squeezed lower-income consumer, is what is driving the stock market higher.

  Phil cites recent earnings growth above 30%, the third straight month of growth above 25%, and growth in all 11 sectors. He argues that the weakness in lower-quartile consumer finances is a separate issue from corporate earnings. Earnings, not consumer health, are what drive the market higher, though he is unsure whether consumer weakness will matter for market fundamentals.

  “Earnings and and the the sort of lower quartile consumer are two different things, and and earnings are clearly driving this stock market higher.”at 4:10

• Elias Griepentrog · Yardeni Research

  Street 2028 EPS of $4.95 is too high versus Yardeni's $4.50, so multiples may rise as estimates fall.

  Elias says that strong earnings momentum has been offset by fear of missing out, which has compressed the P/E multiple. He argues the multiple may reverse later in the year. Consensus 2028 EPS of $4.95 is well above Yardeni's $4.50, which he calls irrational exuberance in earnings that is expected to come down. That may allow the multiple to lift as investors gain confidence in the earnings base.

  “they're assuming 2028 EPS at $4.95. Our 2028 EPS is only $4.50.”at 33:15

US inflation

• Tiffany Wilding · PIMCO

  CPI is broadening beyond energy pass-through, and that is disappointing for a central bank.

  Tiffany says inflation looks like it is broadening. Core goods prices were all strong, and services outside shelter and airfares also accelerated. She attributes part of this to energy, diesel and shipping costs passing through. This is disappointing for the Fed, because one-time price-level adjustments should not spread into broader inflation.

  “It does look like we are seeing, you know, a broadening out of inflation. Now, we think that it's related to passing through of higher energy costs, diesel shipping costs and things like that. If you look all across core goods prices, they were just unanimously strong.”at 16:17

• Cameron Dawson · NewEdge Wealth

  Inflation runs hot near term, then eases into 2027 as energy price comparisons turn.

  Cameron says that while real GDP is not slowing, nominal GDP growth is partly propped up by inflation. She expects inflation to run hot in the near term but ease in 2027, mainly because year-over-year comparisons with energy prices become easier. She links this to whether nominal GDP stays strong enough to support the bank and equity trade.

  “But then you have the inflation part of nominal GDP, and that's where we continue to expect inflation to run hot in the near term, but start to ebb off when we get into 2027”at 26:27

US rates & the Fed

• Tiffany Wilding · PIMCO

  The Fed is not behind the curve as it was in 2022; current policy is close to Taylor-rule levels.

  Tiffany says the Fed is not behind the curve as it was in 2022. In 2022, simple Taylor rules showed policy far below where it should have been. Now the Fed's own Taylor rules are not far from what policy rules suggest, so she sees the current move as an adjustment. She still notes that the broadening of inflation is concerning, and that a 50bp hike in December is on the table.

  “we don't think the Federal Reserve is sort of behind the curve like what it looked like in 2022.”at 18:24

• Elias Griepentrog · Yardeni Research

  Neutral rate is 4.25-4.5%, implying about 50 more basis points of Fed hikes.

  Elias says the Fed's main job is to get rates back to neutral. Yardeni estimates neutral at 4.25-4.5%. He says tighter financial conditions after the October FOMC let the Fed be a bit more patient. He concludes the Fed needs about 50 more basis points of hikes to get back to neutral.

  “Look, we think the number one job of the Federal Reserve right now is to get rates back to neutral. We think the neutral interest rate is between four and a quarter and four and a half percent.”at 36:23

US consumer

• Phil Neuhart · First Citizens Bank

  A K-shaped consumer recovery: inflation is crushing lower-income households' net worth.

  Phil argues the US economy is a K-shaped recovery. Lower-income consumers are being hit by inflation. He cites the Fed's Survey of Consumer Finances: half of the bottom two wealth quartiles saw negative net worth gains from 2022 to 2025, because they hold little stock or housing exposure. He links this to political strain, but says it has not yet shown up in corporate earnings.

  “the inflation is crushing them. Look at the survey consumer finances from the Fed. The bottom two quartiles, half of US consumers have seen negative net worth gains from 2022 to 2025.”at 2:43

Credit markets

• Phil Neuhart · First Citizens Bank

  Fixed income is a viable asset class at a 5.2% aggregate bond yield, so balanced portfolios have opportunity.

  Phil argues that higher yields have made bonds a useful part of balanced portfolios. He cites the aggregate bond yield of 5.2% as the basis for the opportunity. He says First Citizens is fully invested in investment-grade credit, with no high yield exposure, and is emphasizing energy and financials.

  “We are reminding clients that fixed income is a viable asset class. You have an aggregate bond yielding this morning at 5.2%.”at 8:25

Banks

• Cameron Dawson · NewEdge Wealth

  Regional banks are the gauge: if they stay in uptrends, markets see AI funding concerns as contained.

  Cameron says banks will reveal whether the AI funding concerns are spreading into the economy. Large-cap bank results are distorted by tough investment banking comparisons, so regional banks are the cleaner signal. If they hold their uptrends and support, the market is saying a broader growth scare is unlikely. She says the whole outlook hinges on banks doing well with sustained nominal GDP.

  “watch the regional banks. If those remain in uptrends, if those continue to hold support”at 25:34

US stock market outlook

• Elias Griepentrog · Yardeni Research

  Yardeni sticks to S&P 500 targets of 7,900 by year-end and 8,400 by mid next year.

  Elias says that despite recent volatility, Yardeni is sticking with its S&P 500 target of 7,900 by year-end and 8,400 by mid next year. The house view is that the post-election sell-off has over-priced roadblocks to the AI investment boom, so the index can still reach these levels.

  “despite all of the volatility that we're currently seeing, we're sticking to our 7,900 target for the S and P 500 by year end, 8,400 by mid next year.”at 32:18

US deficit & government debt

• Elias Griepentrog · Yardeni Research

  A 6% fiscal deficit during expansion injects money into the economy and adds fuel to growth.

  Elias says the government is running a 6% fiscal deficit during an economic expansion. He calls this injecting money into the economy, which adds to the growth momentum. He presents it as one of three pillars of economic resilience, alongside the consumer and business spending.

  “then you have the government with a 6% fiscal deficit during an economic expansion. So the government is printing money, is injecting money into the economy during an economic expansion and that is also adding to the fuel that we're seeing in this economy.”at 34:00