Bloomberg Surveillance 2/17/2026
Speakers
**Ed Yardeni** — President, Yardeni Research
— Yardeni Research president
Summary
- The Great Rotation: A consensus is forming among strategists (BlackRock, Morgan Stanley, Yardeni) that the market is shifting from "Virtual" (AI/Tech) to "Physical" (Industrials, Energy, Staples). This is driven by AI fatigue and valuation concerns rather than recession fears.
- International Divergence: Multiple guests (Koesterich, Skelly, Memani) identify Japan and Korea as superior value plays compared to the US, citing fiscal stimulus and semiconductor tailwinds without the extreme US valuations.
- Bond Market Skepticism: Despite the rally in Treasuries (yields dropping toward 4%), experts like Earl Davis and Russ Koesterich are fading the move, arguing that inflation/supply dynamics do not support 10-year yields breaking significantly below 3.90% - 4.00%.
- AI Disruption Paradox: There is a conflict between the "AI Bubble" narrative (sell tech) and the "AI Disruption" narrative (sell everything else because AI replaces jobs). The current market reaction is punishing both, creating a "confusing" environment for capital allocation.
Trade Ideas
Koesterich notes BlackRock is "trimming tech exposure and adding to cyclicals like industrials." Yardeni observes investors moving from "virtual themes to physical themes." The market is experiencing "AI fatigue." Investors are seeking safety and value in the "analog world" (physical economy) which has been neglected during the tech boom. This rotation is not recessionary but a rebalancing of valuations. LONG physical economy sectors. A sharp economic downturn would hurt cyclicals (Industrials/Energy) regardless of the rotation.
Koesterich points to "better value opportunities outside the US," specifically citing Japan (fiscal stimulus) and Korea/Taiwan (semiconductor rally). Skelly mentions the "global reflation trade" where the US has ceded leadership to these regions. While the US struggles with high valuations and AI doubts, Asian markets offer the same tech/semi exposure (AI hardware) at lower multiples, plus idiosyncratic catalysts like Japan's corporate governance/fiscal shifts. LONG Asian developed/emerging markets. Global trade wars or US dollar strength reversing.
Jefferies raised its price target. Connie notes Walmart is gaining market share with households earning over $100k and is monetizing data/ads like a tech company. Walmart is no longer just a retailer; it is evolving into a data/advertising platform (high margin) while using scale to keep prices low (gaining share). This justifies a higher multiple than historical norms. LONG WMT as a defensive growth compounder. Valuation is already stretched relative to historical retail multiples.
Skelly states, "We have been recommending Gold for over two years and we like that trade." Yardeni notes Gold is a "very good diversifier." In a "global reflation" environment with geopolitical instability and doubts about US fiscal health/tech valuations, Gold acts as the ultimate non-correlated hedge. LONG GOLD. Real rates rising significantly or a strong dollar.
When asked about pricing power, Connie notes that "quite a bit of pricing did come through" and expects "higher for longer prices on these toys." Despite fears of consumer weakness, toy companies have successfully managed price elasticity. Sticky pricing protects margins even if volume growth is modest. LONG Toy manufacturers on pricing power resilience. Consumer spending cliff or tariff impacts on production costs.
Davis mentions Oracle bonds trade about 200 basis points over 30-year bonds and 100 basis points over Meta equivalent bonds. He is comfortable with the "revenue generated by the future of AI supporting the spend." The spread offers a significant cushion and reward for risk compared to tighter tech credits. LONG ORCL Credit. AI revenue fails to materialize to cover capex debts.
Starboard Value has taken a stake in TripAdvisor. Similar to NCLH, activist presence suggests a push for value unlocking, potentially through a breakup or sale of assets. LONG TRIP. Turnaround execution failure.
Dani Burger
Anchor, Bloomberg Television
Elliott Management has built a stake of more than 10% in Norwegian Cruise Line. Activist involvement typically signals a push for operational improvements, cost-cutting, or strategic changes to close the valuation gap with peers like Royal Caribbean. LONG NCLH on activist catalyst. Elliott fails to effect change; consumer travel demand slows.
Earl Davis
Head of Fixed Income, BMO Global Asset Management
Davis states, "As we approach 3.90 [on the 10-year], we go more and more underweight." Koesterich says, "I would be cautious about this rally in the 10-year, particularly as we get down to 4%." The market is pricing in aggressive cuts and a flight to safety that contradicts the reality of supply issuance and persistent inflation floors. Davis argues yields below 4% are not sustainable without a crash, making this a selling opportunity. SHORT duration at these levels. A geopolitical shock or rapid recession could force yields lower (flight to quality).
Up Next
This Bloomberg Markets video, published February 17, 2026, features Russ Koesterich, Connie Maneaty, Dan Skelly, Earl Davis, Dani Burger discussing XLI, XLP, XLE, EWJ, EWY, EWT, WMT, GOLD, MAT, HAS, ORCL, TRIP, NCLH, TLT. 9 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Russ Koesterich, Connie Maneaty, Dan Skelly, Earl Davis, Dani Burger · Tickers: XLI, XLP, XLE, EWJ, EWY, EWT, WMT, GOLD, MAT, HAS, ORCL, TRIP, NCLH, TLT