Bloomberg Surveillance TV: September 3rd, 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 a.m. 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 finding their footing. Keith Lerner of Truist writing, the market is moving from a powerful earning season to a more two sided macro debate with interest rates taking center stage. Keith joins us now for more. Keith, welcome to the program. For the last six months or so, high yields have not been a problem for this equity market. Keith, the question of the week is whether you believe that's about to change.

**Keith Lerner** (0:59)
Well, first, great to be with you. I think it is already changing. The market, even really since June, the S&P, I don't think people realize it. We're up about 1%.
And I think after this earning season, it's all about the macro.
The tenure is playing with all of us because it's staying around this 480 level, which is an important technical level. And if we start to move more abruptly above there, I think that's a risk. I would say it's a two-sided risk because everyone is really braced now for higher rates and concerned about that. And the Fed funds' futures is now pricing in. More than a 60% chance of a rate hike. So if they decide to hold, I mean, that could potentially be some upside for the market, too. So I think it's a two-way risk. And it is all about rates in the short term, as opposed to this earning season, which was really one-sided. And that's why, Jonathan, we just think that this September, even though it seems like it's a pretty consensus, it's just a choppier period, but I want to lose sight that we still think the primary market trend is up, and that earnings will ultimately support this market. But it's all about the macro over the next few weeks.

**Jonathan Ferro** (2:02)
Well, let's just take one side of the rates story and talk about rates potentially going higher, Keith. I think it matters why rates might go higher. We were talking about this yesterday. Strong nominal GDP is bearish for bonds. It's bullish for stocks. If they're raising rates for the right reasons, that can be constructive for the outlook for the equity market. Are they going to be raising rates for the right reasons?

**Keith Lerner** (2:22)
Yeah, well, in some ways, it's a combination. It is strong economic growth, but it's also that inflation, and obviously, oil prices are having an impact as well. Of course, there's the discussions about fiscal deficits, term premium, what's happening in Japan. So, yeah, listen, I think our view is that they don't necessarily need to raise rates, but from the last meeting, there is this focus on inflation. And if you keep talking about your focuses on inflation, you need to raise it.
But Jonathan, I don't think a quarter point matters that much. After we get through this next period, I think what would be more problematic for the markets, and what we saw in the late 90s, when we had technology being leadership, is that you had a series of rate hikes, which is much more destructive for the overall market. We don't think that's most likely the case. And then to the other point is, even though rates are moving higher here, credit spreads remain very firm.
Even though we've seen tech credit spreads move up, the overall index spreads are completely very tight as well. So we're not seeing some disruptive there. So all in all, I think the market can handle another quarter point move. It's again, if it's a series of hikes, I think that would be more problematic for the bull case.

**Lisa Abramowitz** (3:28)
Keith, you said something really interesting, that if the Fed does not hike rates this month, that that could lead to an upside surprise. Do you really think that that's the case? Or do you think that could be construed as potentially having political overlay or a lack of credibility in the Fed that leads to some further jitters in the bond market? In other words, is this not so much of a binary trade as it might seem?

**Keith Lerner** (3:50)
Yeah, I think it's a fair point. I mean, I've been kind of debating that in my own head recently, you know, because the market's pricing, and we're braced for this.