Bloomberg Surveillance TV: October 5th, 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. We begin this hour with stocks and bonds steady Jack Manley of JP Morgan Asset Management writing expect more volatility, but also for the winners to keep on winning. Jack joins us now for more. Jack, good morning.

Jack Manley (0:46)

Good morning.

Jonathan Ferro (0:47)

Who's going to keep on losing? The banks, the small caps, the equal weight.

Jack Manley (0:51)

Yeah, I mean, I think the small cap trades in a lot of trouble right now. I mean, we're seeing a flight to quality with rates moving higher. But within the large cap space, the thing that I'm trying to wrap my head around is the biggest change, the biggest pivot over the past couple of weeks has of course been the about face of monetary policy. And I just have a really hard time seeing how slow, well telegraphed incremental adjustments to monetary policy are meaningfully going to outlook either A, the AI trade or B, the broader US economy. And if the broader US economy is not going to be meaningfully impacted, then I'm not looking for meaningful adjustment in prospects for cyclical stocks. And if AI money keeps on getting spent, because this is this kind of 21st century space race that we've talked about before, then the AI trade keeps on going. It's so like, you know, I think there's a lot of choppiness. I think we're trying to get our heads around what the data are telling us and how the Fed's going to respond. It is this this dance, but ultimately underneath the surface, the fundamentals have not changed enough for my view to change a whole lot. So yeah, small caps keep on underperforming, large caps keep on doing pretty well in market leadership in that large cap space is more or less maintained.

Jonathan Ferro (1:57)

Ignore rate vote, is that the message from you?

Jack Manley (1:59)

I would say so, yeah. And I would think, I mean, and maybe I'm crazy. And like, look, cards on the table, like Mea culpa, like egg on my face, I've been talking about like, there's no way the Fed's going to raise rates. And like, here we are. And they did. I still maintain that view though, that interest rates did not need to move higher. They still don't need to move higher. What we saw a couple of weeks ago was using some specifically sort of cherry picked indicators to justify rate hikes that were ultimately much more political in nature. And that if I had to guess where say the 10 year goes over the next 12 to 18 months, it's lower rather than higher. So short term, yeah, ignored and think longer term that the borrowing costs get a little better.

Lisa Abramowicz (2:39)

Ignore it because you think that rate volatility is peeking out here.

Jack Manley (2:42)

I would think so, yeah. That's exactly right, yeah.

Lisa Abramowicz (2:44)

Ultimately, what are the indicators that sort of edify that view? In other words, if we get a really high, hot ISM services data point, do you have to shift? Do you have to think about maybe this economy being hot enough to warrant for further rate hikes?

Jonathan Ferro (2:56)

Yeah.

Jack Manley (2:56)

I mean, again, you're asking the moron, right? Because I got everything wrong over the past month. So let's just say that right there. But when we were talking earlier, when you guys-

Jonathan Ferro (3:04)

I should set these people at French Aliexpress.

Lisa Abramowicz (3:07)

It's quite the opposite. Look at this. I mean, it's like self-flagellation.

Jonathan Ferro (3:10)

Yeah, I know.

Jack Manley (3:11)

Really, I feel so bad. But you were speaking earlier. Is it PMIs? Is it inflation? Is it labor? To me, it's labor. It has to be labor because inflation is warm, not for artificial reasons, for supply-side reasons. And when you remove the energy component of CPI, you are looking at X energy CPI that more or less looks exactly like it did back in January, February. Sure, PMIs have been warm, and we saw that upward revision to GDP numbers, but this is still not an economy that's posted 4% annualized growth. It's the labor market that I think we really need to pay attention to.