Bloomberg Surveillance TV: August 27th, 2026

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, Podcasts, Radio, News.

**Jonathan Ferro** (0:11)
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferro, along with Lisa Abramowitz and Annmarie Hordern. Join us each day for insight from the best in markets, economics and geopolitics. From our global headquarters in New York City, we are live on Bloomberg Television weekday mornings from 6 to 9 AM Eastern.
Subscribe to the podcast on Apple, Spotify or anywhere else you listen. And as always on the Bloomberg Terminal and the Bloomberg Business App. Here's a view on Wall Street this morning. Aaron Kennon of Clear Harbor Asset Management writing, expect AI and the extraordinary capital investment associated with the data center build out to increasingly enter the Fed's discussion. Aaron joins us now for more. Aaron, welcome to the program. Let's build on that. Is that a story the Fed strips out or has to bake in and begin to react to?

**Aaron Kennon** (0:56)
Well, we'll have to see, Jonathan. I mean, we're going to hear from Fed Chair Warsh on Friday, and maybe we'll be able to read some tea leaves on how they're thinking about the September meeting. But certainly, AI is a big part of their story and their contemplation because in the short term, we're looking at inflationary pressures that are impacting ultimately consumers or at least concerning consumers, and there's huge political consequence to that. In the long term, there's a hope that AI will generate significant productivity gains, but it could also disintermediate employment. So there's a challenge there for the Fed as they speak, both to the market as well as to the American people at both the FOMC level as well as out in Jackson Hall.

**Jonathan Ferro** (1:40)
And look at the runway for demand right now, the call from NVIDIA. They're telling you this is going to continue even with memory costs going to the moon, through the roof. Aaron, with that, you've got a market at the moment, you've got a whole AI ecosystem that's arguably increasingly rate insensitive, not rate sensitive. What can this Federal Reserve do about any of that?

**Aaron Kennon** (2:00)
Yeah, I think it's challenging, which is probably why they're going to continue to sort of focus perhaps more in a more traditional manner on the inflationary data, and perhaps look through the rear view mirror. But as Fed Chair Warsh has indicated, sort of current data is more important than trying to predict future data. So it's going to be a challenge. I mean, the last couple of weeks, we've seen both disinflationary pressures from PPI and CPI. And then just earlier this week with PCE, we saw a little bit of reacceleration concern there. And then on the employment front, of course, the last print was a little weaker than the prior few prints. And so I think the Fed is sort of in a holding pattern here, which is probably why the market may be correct that they don't do anything in September and that they contemplate a move in December. So we'll have to see.
Certainly tomorrow will be quite interesting from that perspective.

**Tom Keene** (2:57)
Well, things like the impact of productivity, Aaron, because of AI aren't immediately clear yet as to what impact that will have on the economy. What is clear now is the enormous wealth that's being created from all of this. There are stories of hundreds of houses in San Francisco going for $1 million over asking prices. The cars at the Monterey Car Show doubling in price at auctions that they were a year ago. Aaron, what about the wealth effect? How should policymakers be thinking about this enormous amount that all of a sudden consumers have in terms of firepower?

**Aaron Kennon** (3:31)
Yeah, I mean, it's the tail of two economies. And certainly, if you do not own financial assets, in the midst of this period of a great boom, both on AI, but just the broader equity market since 2022, you've been left out in the cold. You've experienced higher interest rates on your cars. If you have a variable mortgage, you've experienced higher interest rates on that. Most people in the lower quartile don't have a mortgage. And so it's been, I think, really challenging. Credit card defaults at the lower quartile have actually increased. And their lines have been cut in some cases. And of course, prime rates on credit cards have been elevated. So you have a real challenge, which is feeding into the November elections and the narrative around data centers not in my backyard, inflation.
ISM manufacturing data has actually been accelerating, but we're not seeing significant improvement on the employment side as it pertains to that growth. So what does that mean? Higher margins for corporations and perhaps less of a benefit from an employment perspective going forward. At least that's the concern right now at a policy level.