Speaker · Updated
Alicia Levine: latest market views
BNY Wealth
Summary
Alicia Levine is Head of Equities and Capital Markets Advisory at BNY Wealth and a leading voice on its Investment Strategy Committee, and she previously served as Chief Strategist at BNY Mellon Investment Management.
Chorus has 18 views from Alicia Levine across 3 episodes on Bloomberg Surveillance and CNBC Closing Bell since October 7, 2026.
What they talk about most
- US Treasuries & yields · 4
- Enterprise AI adoption & AI software · 2
- US stock market outlook · 2
- AI chips & semiconductors · 1
- OpenAI · 1
- AI bubble & tech valuations · 1
- AI infrastructure & data centers · 1
- Banks · 1
- US growth & recession risk · 1
- Earnings & corporate profits · 1
- Private credit · 1
- US deficit & government debt · 1
The latest views
Newest first. Every quote is checked against the episode's transcript.
OpenAINeutral
OpenAI's revenue reclassification is likely cleanup before an S-1; the market reaction looks small.
Levine argues the market's reaction was small and calm, which suggests the change is not significant. She thinks the revenue changes may be teams standardizing financials ahead of an S-1 filing, since OpenAI will soon face public-market standards. She says the story would matter only if it reflected a change in ROI or the pace of investment, which she does not see here.
“I'd say the reaction is actually quite small. And I would say that what we heard today could just be cleaning up numbers in anticipation of an s one to standardize what the financials are.”at 15:21
Enterprise AI adoption & AI software
AI benefits extend to health care, financials and industrials, lifting their margins and revenue.
Levine argues that AI investment is not limited to hyperscalers and chip makers. Companies in health care, financials and industrials are the ones using the technology, and they are seeing revenue driven higher and margins grow. She says questions about ROI or the pace of investment would be a negative for the trade, but she does not see the OpenAI story as meaningful.
“we're not only looking at the AI beneficiaries and the hyperscalers, but we're also looking at the companies such as health care and financials and industrials that are going to be the beneficiaries of using it. And so what's happened is margins have gotten larger.”at 15:51
Semiconductor stocks at 6-7x forward earnings already price in a possible slowdown; not a huge hit.
Levine notes that many semiconductor names trade at six to seven times forward earnings. That low multiple reflects investor concern that current earnings levels may not be sustainable. In her view, the price already reflects some possible future slowdown of unknown length, so the OpenAI revenue story is unlikely to be a huge additional hit to the group.
“there's a reason they're trading in six and seven times forward earnings because there is a concern that the level of earnings is not sustainable in the future.”at 16:49
Market leadership is narrowing to growth megacaps; the index holds up while small caps lag, and the bull market can continue.
Small caps are about 8% below their high and triple-C spreads are widening, while mega-cap growth stocks regained their footing after Jackson Hole, when Warsh turned hawkish. Owning the index or the QQQ or SPY is fine, and growth has carried the market for fifteen years. She argues the narrow leadership can persist, as the 2023 episode showed, when about 10 stocks led and the market kept rising until a manufacturing recovery broadened it. The broadening trade helped stock pickers but did not lift the index because capital rotated out of the top of the market. Earnings can keep the bull market intact.
“You started to see the small caps underperform, the mag seven got their footing, became a floor under those charts.”at 2:22
Bloomberg Surveillance: Bloomberg Surveillance TV: October 7th, 2026 ·
Bank stocks are pressured by a flattening yield curve, not by weak bank fundamentals.
Bank underperformance is not because banks lack resilience. Expectations for higher fed funds flatten the yield curve, and that margin pressure hits the area. The same logic hits cyclicals, which borrow, because their marginal cost of capital rises.
“Right? So you're seeing Bank stocks. You're seeing the bank stocks not because the banks aren't resilient because on the margin, if you're having a flattening of a yield curve because of expectations for higher fed funds rate, that's what's going to pressure that area as well.”at 3:08
Bloomberg Surveillance: Bloomberg Surveillance TV: October 7th, 2026 ·
Stock-bond correlation broke in 2023; bonds can't reliably offset stock volatility in a rising-rate environment.
The stock-bond correlation has been broken since 2023, when the market came out of a zero-rate world. In a rate-rising environment, which she says is the current one, bonds are very hard to use as an offset to stock volatility.
“So the correlation has been broken for a while, and it's been broken really since 2023 when we came from a zero rate world. Very hard in a rate rising environment, which is what we're in for bonds to be the offset to stock volatility.”at 4:33
Bloomberg Surveillance: Bloomberg Surveillance TV: October 7th, 2026 ·
Clients should stay short-to-intermediate duration; going long needs a bet on Fed cuts from a weaker economy.
Going further out in duration requires betting that the Fed stops hiking and eventually cuts because something worse is happening in the economy. Her firm is positioned short-to-intermediate for clients, which has been a safer place to be. Nominal growth is running at 6.3%, the long end is under pressure, and the environment is not one to experiment with long duration.
“You have to bet that the fed is going to stop the hiking cycle and have to cut at some point because there's something worse in the economy. ... So we're in the short term to intermediate for our clients. It's been an okay place to be. It's a safer place to be.”at 4:57
Bloomberg Surveillance: Bloomberg Surveillance TV: October 7th, 2026 ·
Yields could easily reach 5.5%, a normalization consistent with 2.5% growth and 3% inflation.
She sees yields getting to 5.5%, which would be part of a normalization cycle in an economy growing about 2.5% with inflation around 3%. At that level bonds become a competitive alternative to stocks. She also notes that investors are comfortable lending to hyperscalers, which is a competing use of capital.
“I think we can easily see yields getting to five and a half percent here. That would be part of the normalization cycle in an economy that's growing two and a half percent with two and a half to 3% with inflation at 3%.”at 5:30
Bloomberg Surveillance: Bloomberg Surveillance TV: October 7th, 2026 ·
AI infrastructure & data centers
Political pushback against data center build-out is the main threat to AI capex that funds S&P earnings.
The rapid AI build-out and its capex are funding S&P earnings, so it is a self-reinforcing circle. The thing that stops it is a slowdown in data center build-out, which is political across the spectrum. Governor races in states that might flip, such as Texas, could make slowing the data center build-out a campaign issue in 2028. That could be where a market rumble comes from, and she says the market is not yet pricing it in.
“What's at the heart of this? It's the rapidity of the AI build out. It's the CapEx spend. That CapEx spend is funding the earnings of the S and P. ... I think what stops it really is the slowdown in the data center build out. And that's political and it's political across the spectrum.”at 6:36
Bloomberg Surveillance: Bloomberg Surveillance TV: October 7th, 2026 ·
A modest build-out slowdown would curb bubble fears and extend the AI trade's longevity.
Slowing the build-out a little makes it harder to raise capital, which increases concern over the trade and reduces the bubble-like feeling in markets. Returns on AI spending appear to be starting, which drove another leg higher in tech stocks after August earnings. The slowdown would affect earnings growth, which investors must watch, but a more measured pace helps the trade last.
“if you slow it down a little bit, prevent the concerns of a bubble. Right? Because then it becomes a little bit harder to raise the capital. ... If you slow it down a little bit, that actually helps the longevity of the trade.”at 7:48
Bloomberg Surveillance: Bloomberg Surveillance TV: October 7th, 2026 ·
No US recession is coming; the economy is strong, so an AI slowdown means a correction, not recession.
If the data center slowdown hits earnings, the result would look like a correction, which she calls viable because she does not see a recession. She describes the economy as really strong, with nominal growth running at 6.3%.
“That looks like a correction, which will be eminently viable because we don't see a recession here. We think the economy is really strong.”at 8:06
Bloomberg Surveillance: Bloomberg Surveillance TV: October 7th, 2026 ·
Owning the S&P has worked; growth and earnings keep beating expectations despite narrow leadership.
The index has held up through the rate selloff, a hawkish Fed and turmoil in European bond markets because growth keeps exceeding expectations, and so do earnings. Leadership is narrow, roughly 15 stocks carrying the market, as in 2023-24, but she argues the narrowness can continue. Semis and software have rallied together at times while growth is winning even with rates higher.
“and everybody's wringing their hands that it cannot continue when in fact it can continue. And if you simply own the S and P, you've been fine throughout all the policy discussions...”at 2:24
Huge deficit issuance is fine as long as there is demand for the debt to absorb it.
The dollar amount of issuance is eye-popping, but the test is whether auctions can place it. So far there is demand, so the debt gets sold and the market moves on. She concedes a price exists at which that stops happening, but she does not see the market there yet.
“If there's demand for the debt, it's fine. Like, the the dollar amount is eye popping. But if there's demand, you can place it.”at 4:00
The 10-year Treasury yield can easily reach 5.5%, consistent with 6.2-6.3% nominal growth.
Debt demand is sufficient to absorb large issuance, so supply is not the constraint. An industrial boom is visible in rising wages and manufacturing that is moving straight up, and this drives the long end higher. Nominal growth of 6.2-6.3% supports a 5.5% ten-year yield.
“we think the ten year can easily get to five and a half that works with nominal growth at 6.2, 6.3%.”at 4:12
S&P 500 profit margins have been walking higher for two decades; the expansion is structural.
Her argument for equities is to follow gross profit, not just revenue. Fast revenue growth gets passed down to the bottom line because of fixed costs, and margins keep moving higher. She points to the S&P margin trend over the last twenty years as evidence that the margin expansion is structural and not just a feature of this year.
“not just revenue generation, but massive profit generation because margins keep on moving higher. Look at the margin of the S and P over the last twenty years. We've been on a margin walk much higher. It's structural.”at 6:01
Stress in weak private-credit borrowers is normal cycle Darwinism; not worried, some distressed trades mispriced.
Distressed loans, many held by software companies, are trading below 60 cents on the dollar at the highest level since the pandemic. Weaker companies that borrowed at low rates, partly through private credit outside the traditional system, are showing stress as rates rose and the Fed turned hawkish. She sees this as a normal part of the cycle where weak firms show problems first, and says distressed capital is arriving to clear it.
“the weaker companies that borrowed at lower rates and funded through maybe some of the private credit a few years ago outside of the traditional financing system, but in the alternative capital providers are showing some stress.”at 7:43
The Fed looks more hawkish than markets priced six months ago; she assumes higher-for-longer rates.
Markets have struggled to price the Fed's reaction function. The Fed now looks much more hawkish than the market priced in six months ago, and combined with a 145 basis point move in the ten-year yield, this is what is squeezing the weakest borrowers. She therefore assumes rates stay higher for longer.
“a Fed that looks to be a lot more hawkish than the market priced in six months ago.”at 7:50
Enterprise AI adoption & AI software
Companies using AI tools to expand margins will see strong operating leverage; these are the winners.
Amid credit stress among weaker borrowers, she argues the strength is in firms levered to using AI tools to expand their business and margins. Because of this, she expects a lot of operating leverage across many companies as a result.
“I'd say the strength is really those who are levered to using AI tools to expand their business and expand their margins, and you're going to get a lot of operating leverage”at 8:38
Shows
- Bloomberg Surveillance · 2 episodes
- CNBC Closing Bell · 1 episode
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