Bloomberg Surveillance TV: August 6th, 2026

**Lisa Abramowicz** (0:02)
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**Jonathan Ferro** (0:11)
This is the Bloomberg Surveillance podcast. I'm Jonathan Ferro along with Lisa Abramowicz 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.
We begin this hour with stocks hovering near all-time highs. Bob Elliott of Unlimited Funds writing, the rotation isn't a sign of resilience but misplaced optimism as talks ramp up, folks ramp up, the FOMO caution is warranted. Bob joins us now for more. Bob, good morning. Good to see you.

**Bob Elliott** (0:51)
Good morning.

**Jonathan Ferro** (0:52)
What are your thoughts on this rotation so far? And do you think we've had that so-called clearing event that's going to allow us to rally on a sustainable basis?

**Bob Elliott** (0:59)
Well, it looked like even a week ago that we might be moving towards the point where we got a clearing of the mania that existed in the AI and semi-sector and all of a sudden we're back to FOMO and catch up here. And that's really been the driver of what's been going on in this market is everyone is so concerned about being behind the curve as prices go higher and higher. It's classic bubble type activity. I'm calling the top of the bubble a little challenging. Anyone who's been in this business for long enough knows. But when you see something like that, you've got to recognize that levering in and going full bore on the bubble is often an imprudent move.

**Jonathan Ferro** (1:37)
You're calling it a bubble. Just define why you're calling it a bubble right now.

**Bob Elliott** (1:40)
Well, I think a classic bubble is extremely high expectations, which to be clear on earnings, we have the highest expectations for earnings growth over the course of the next five years that we've had in the post World War II era. Extraordinary outcome is priced into these markets combined with the fact that people are using significant leverage to buy assets because they're already full up on getting exposure to these names. They have to go and add leverage and that leverage is everywhere.
I wrote a recent piece of my sub-stack called Leverage Leverage Everywhere.
It's interesting, this isn't the leverage of the GFC concentrated in highly levered banks. This is like Wells Fargo giving significant amount of securities leverage to their wealth clients. This is levered ETFs. This is options trading. It's kind of everywhere and diffused, so it's hard to point to the exact place where all the leverage is piling up, but it's kind of everywhere. And that's a good sign that this market is overbought on borrowed money.

**Lisa Abramowicz** (2:37)
So what would make you think that actually is starting to get cleared out? Because some people were saying that after the declines that we had seen in some of the chip names as well as the hyperscalers and then of course with situational awareness that gave them the confidence to go back in. What are you watching that says, hold on a second, not so fast?

**Bob Elliott** (2:54)
Well, I think one of the challenges is the rotation means that the overall S&P 500 earnings expectations actually haven't changed that much, right? Overall, at the economy-wide level hasn't changed that much. We're just sort of shuffling between whether the money goes to the AI names or the hyperscalers or to the real economy, let's say. And the challenge is when the overall expectations are so high at the economy-wide level, this shuffling can get confused and you might think, oh, things have repriced. But in aggregate, we're still expecting over 20 percent earnings growth for five consecutive years. That's just an extraordinary outcome that's priced in.

**Lisa Abramowicz** (3:31)
But the earnings have actually been extraordinary and it's actually been some of the best earnings we've ever had outside of a recovery period post-crisis. Why do you think that that is unsustainable, especially given where rates are here?

**Bob Elliott** (3:43)
Well, you could have earnings for a quarter, you can have earnings for two quarters. A lot of that stuff is asset-oriented earnings, right? A big chunk of the earnings growth that we're seeing is basically holding equity in other positions and booking that as earnings. And so the question is not, can you get earnings, good earnings for one or two quarters? The question is, can you get it persistently? And if you think about 25% earnings growth, which is roughly what's priced in in the five year expectation, in order to get 25% earnings growth in an economy that's growing at six, seven percent nominal, you either have to have one of the most extraordinary expansions and margins ever seen in recorded history, which will crush workers, or you have to have some sort of productivity boom that has never been seen in the history of humanity. So look, could that happen? Sure, anything could happen, right? But the idea that extraordinary is priced as consensus, that's the problem right now.