Markets Brace for the Fed as Earnings Roll In 10/27/26

Seagate Technology Holdings

Across the shows: 2 speakers in other episodes, 2 bullish and 0 bearish calls, past 30 days

• Matt Bryson · Wedbush SecuritiesBullish

  Seagate is a key beneficiary of AI storage demand; hard-drive pricing should follow NAND higher.

  Bryson argues AI needs large amounts of data and hard drives are the cheapest way to store it, and there are not enough of them. NAND, the closest peer, has risen six or seven times in a year or two, and he expects hard drives to follow, perhaps by three times rather than six, while pricing is still flat to the largest buyers. He expects contract resets at hyperscalers to bring big gross-margin jumps, as seen in DRAM and NAND. He treats the soft quarter as cyclical: exabyte shipment growth slowed after a strong quarter, and the implied guide of about 60% gross margin reflects lower production rather than a larger problem.

  “You need data for AI. And the cheapest way to store data is hard drives. There aren't enough hard drives.”at 22:00

US stock market outlook

• Darrell Cronk · Wells Fargo

  Markets can glide through November and December, but credit, oil and rates risks threaten year-end turmoil.

  Cronk calls the environment tough. The S&P 500 is back about 100 points below its September highs, and beneath the stable index there is heavy rotation between sectors, mainly out of tech, rather than capital leaving equities. He thinks the market can glide through November and December. He warns that widening high-yield spreads, oil prices, current interest rates, and overseas problems in France, Brazil and Asian equities could add turmoil into year-end.

  “We still think you can kind of glide through in November and December, but, you know, high yield spreads widening, oil prices, interest rates where they are”at 12:15

• Ariana Salvatore · Morgan Stanley

  Morgan Stanley stays constructive on US equities; markets usually perform well in the three to six months after elections.

  Salvatore says her firm is still constructive on the US equity market. History shows solid performance in the three to six months after an election regardless of outcome. She adds that this cycle will not follow the easy divided-government playbook. The market also has not yet had a deep pre-midterm sell-off, so a snapback is possible.

  “we're still constructive on The US equity market. You know, we tend to see pretty solid market performance in the three to six months after the election regardless of what happens”at 42:50

Credit markets

• Michael Santoli · CNBC

  Investors are demanding concessions on AI-related debt; investment-grade ratings mask costly borrowing.

  Santoli cites SpaceX's debt price talk above 8%. He says that even if the paper is investment grade, that is not an investment-grade rate, and that Oracle is similar. He also points to Meta's stock offering, which was priced at $625 after trading near $770 two weeks earlier. From this he concludes the market is extracting concessions on AI financing, and he asks whether that slows the aggregate buildout.

  “SpaceX price talk on their debt was over 8%. Yes. There may be investment grade on paper, but that's kinda not an investment grade rate.”at 6:20

Sports, betting & prediction markets

• Michael Santoli · CNBC

  Former crypto traders appear to be shifting into prediction markets.

  Santoli reads Robinhood's results as some evidence that many former crypto traders have moved to prediction markets. The supporting facts are that prediction-market revenue rose about sixfold year over year and brought in more revenue than equities trading, while crypto notional volume fell about 38%. He presents it as tentative and wants more detail from the analyst call.

  “Maybe a little bit of evidence there that, a lot of the former crypto traders did move on to prediction markets of various types.”at 9:34

US Treasuries & yields

• Tim Urbanowicz · Innovator Capital Management (Goldman Sachs Asset Management)

  Bonds pay again and hedge an AI slowdown, but they will not hedge inflation.

  Urbanowicz says that for the first time in a long time, bonds pay investors a meaningful yield, so a 7% return no longer requires heavy equity exposure. He argues that diversification now means owning different risks. Bonds protect against a specific risk, an AI slowdown, but not against inflation, so other holdings are needed for that.

  “For the first time in a long time, bonds are actually paying you, and they can protect you.”at 14:11

International equities

• Tim Urbanowicz · Innovator Capital Management (Goldman Sachs Asset Management)

  Korean stocks are cheap after a 30% drop, giving AI-growth exposure without overweighting the US.

  Urbanowicz says the AI trade is alive and well and demand is strong, but investors do not have to overweight the US to pay up for that growth. Relative value is the focus. He points to markets like Korea, which have gone on sale about 30%. He says there is good value there and that investors still get access to the AI growth story.

  “We think that AI trade is alive and well. Demand is strong, but you don't need to necessarily overweight The US to to pay up for that growth.”at 14:45

Enterprise AI adoption & AI software

• Tim Urbanowicz · Innovator Capital Management (Goldman Sachs Asset Management)

  Agent deployment will reward picks-and-shovels such as security, identity and commerce providers.

  Urbanowicz argues the market is entering a new phase of AI adoption, agent deployment. As in the first phase, when the picks-and-shovels suppliers were the biggest beneficiaries, he expects the next phase to reward infrastructure providers, though the beneficiaries will look different. He names security providers, identity and commerce as areas that will matter.

  “We think this next phase of agent deployment is really going to be about those picks and shovels.”at 15:21

AI bubble & tech valuations

• Darrell Cronk · Wells Fargo

  Valuation isn't the 2027 risk for tech; delivering compute, earnings and monetization is.

  Cronk notes that the S&P forward multiple peaked at 23 times a year ago and is now about 19 times, so valuation is not the issue. Demand is also not the issue, given the backlogs across the complex. He argues the risk is expectations: whether the industry can deliver compute, deliver earnings, and monetize models quickly enough. If it cannot, he expects more volatility in 2027, even though earnings growth should still be robust.

  “the tech side of things is really going to be the question we have to answer in 2027. I don't think it's going be a valuation issue. I don't think it's going to be a demand issue.”at 16:23

US housing

• Diana Olick · CNBC

  The housing lock-in is fading, and frozen home sales are stalling remodeling spending.

  Olick says the lock-in effect that kept renovation going is petering out because of the broader economy and weak spending appetite. Roughly half of homeowners still have mortgage rates under 4%, so moving to a smaller home means a much higher rate, which keeps owners in place. With the 30-year fixed rate at 7.33%, owners must choose between staying, upgrading or waiting for better conditions. Home sales are at a 25-year low, and remodeling spending is expected to grow only about 1.5% year over year.

  “it's petering out a little bit just because of the broader economy. People don't wanna really spend money on anything right now.”at 27:10

US rates & the Fed

• Aditya Bhave · Bank of America

  The Fed should hike in October; he expects about 75 basis points of hikes if it waits.

  Bhave says inflation is horrible and the September data were problematic in both the headline and the details. He argues that if the Fed started hiking because of inflation, it should keep going, and most of the committee already backs two hikes this year. He concedes the market is not pricing a move, and says that if the Fed does not hike tomorrow he expects December and then March, with risks of more. He sees the Fed as asymmetric: it cites term premium to justify tightening when yields are high, but does not make the reverse argument now that yields have fallen.

  “ultimately, we think, regardless, they're gonna hike by about 75 basis points. So if they don't go tomorrow, we would think December and then March with risks of more.”at 34:13

US inflation

• Aditya Bhave · Bank of America

  Inflation will stay above target through 2027 and into 2028, driven by supply shocks and robust demand.

  Bhave says inflation is too high and will probably stay above target through next year and into 2028. He gives two reasons: repeated supply shocks that are likely to persist in the data, and robust demand. He expects base effects to become favorable in the first half of next year, which could let year-over-year core PCE roll off significantly. That is why he sees a reassessment later rather than action then.

  “Inflation's too high, and it will probably remain above target through next year and going into 2028”at 34:28

US elections & politics

• Ariana Salvatore · Morgan Stanley

  Midterm voter issues will not carry cleanly into the 2028 presidential race; the transmission channel changes.

  Clients ask whether Democratic midterm outperformance predicts 2028. Salvatore says issues like affordability usually don't carry over cleanly. The channel shifts from one election to the next. In 2022 grocery prices drove voter sentiment, and this cycle gasoline prices are the mechanism.

  “our view is effectively that the issues don't really carry over from one election to the next. And if they do, it's not in a very clean way.”at 40:47

Banks

• Ariana Salvatore · Morgan Stanley

  Proposed financial rules will likely be finalized before year-end, so deregulation continues regardless of midterms.

  Salvatore says many proposed financial rules will be finalized before the end of this year, possibly even before the midterms. Deregulation is controlled by the executive branch through presidentially appointed agency heads. A Congress flip could add hearings and oversight, but she expects the overall deregulatory agenda to stay intact.

  “particularly [the outlook] for financials is really interesting because a lot of the rules that have been proposed are really, in our view, going to be finalized really before the end of this year, even before the midterms in some cases.”at 41:40

IPOs, M&A & deal activity

• Ariana Salvatore · Morgan Stanley

  Deregulation will pull M&A announcements forward ahead of a possibly stricter regime after the next election.

  Salvatore expects a pull-forward in deal announcements. Companies will rush to announce mergers before a potentially more restrictive regime after the next presidential election. She sees early signs of this in recent corporate maneuvering, which fits her view that deregulation continues.

  “you might see the inverse effect of something like m and a comes up because there is, in our view, going to be a bit of a pull forward in terms of announcements ahead of a new potentially more restrictive regime after the next presidential election.”at 42:17

US deficit & government debt

• Ariana Salvatore · Morgan Stanley

  US deficits will expand under every election outcome because spending is the path of least resistance in Congress.

  Salvatore argues deficits expand in every scenario: a Republican hold, divided government, or a Democratic sweep. Fiscal policy is the legislative variable, and in a standoff Congress's path of least resistance is to spend more on both sides. So the usual 'divided government means gridlock and fiscal clarity' playbook does not hold this time, and autopilot spending keeps deficits large.

  “We think deficit expands in every outcome, even in a republican hold scenario, divided government, and democratic sweep. The primary reason for that is that fiscal is really the legislative variable here. And the path of least resistance in congress, when you see something like a standoff, is really just to kinda spend more on both sides.”at 42:50