Trump’s AI Defense Defies Voter Unease; UK Payrolls Drop
Speakers
Mark Cudmore
— Executive Editor, Bloomberg Live / Macro Strategist
Nicholas Becker
— Group Head of Investment and Private Banking CIO, Edmond de Rothschild
Anthony Stevens
— Bloomberg Market Producer
Francisco Blanch
— Head of Global Commodities and Derivatives Research, Bank of America
Ed Cole
— Multi Strategies Equities Head, Man Group
Andrea Felsted
— Columnist, Bloomberg Opinion
Tom O'Shea
— Head of Alternative Investment Strategy, J.P. Morgan Private Bank
Alan Moore
— Bloomberg Shanghai Bureau Chief
Brian Moynihan
— CEO, Bank of America
Mark Carney
— Former Governor of the Bank of England/Bank of Canada, Canadian Politician
Sarah Collin
— Bloomberg Copenhagen Bureau Chief
Simon
— Editor, Bloomberg Markets Today
Summary
The opening trade covers a risk-off session driven by oil above $100, US 10-year yields above 5% and caution ahead of the Fed. Guests debate whether to buy Treasuries tactically, how high oil, diesel and European gas can go, and whether AI-related equity leadership is rotating from semis into software, cybersecurity and the application layer. UK payrolls weakened, China consumer data stayed soft, and luxury and bank shares came under pressure.
- US 10-year Treasury yield tops 5% for first time since 2007 ahead of Fed decision.
- Oil and diesel rise on Middle East supply disruptions; European gas spikes.
- Mark Cudmore favors Treasuries tactically; Nicholas Becker sees Treasuries mainly as a recession hedge.
- Francisco Blanch sees upside for Brent, diesel and European gas, and remains medium-term bullish gold.
- AI safety debate drives rotation from semis into software and cybersecurity; guests debate AI infrastructure versus application layer.
- China consumer and investment data remain weak, pressuring luxury; UK payrolls fall before BOE.
- Bank stocks fall after BofA flags flat trading revenue; J.P. Morgan guest warns on software loans and favors real assets.
Ideas
Rotate from semis into software/cybersecurity
Stevens says the political debate over AI safety and frontier pacing is driving a rotation out of the most high-beta parts of the AI trade, including semiconductors, optical and memory names, and into software, cybersecurity, consultancy and Indian IT services. He argues cybersecurity is a clear winner as safety concerns move to the fore, while cheaper tokens benefit software and token users, and the rotation is likely to continue as white papers and industry debate shape equity positioning.
Rotate from semis into software/cybersecurity
Stevens says the political debate over AI safety and frontier pacing is driving a rotation out of the most high-beta parts of the AI trade, including semiconductors, optical and memory names, and into software, cybersecurity, consultancy and Indian IT services. He argues cybersecurity is a clear winner as safety concerns move to the fore, while cheaper tokens benefit software and token users, and the rotation is likely to continue as white papers and industry debate shape equity positioning.
Treasuries as recession hedge, not tactical
Becker says Treasuries are not a good tactical entry point because inflation is not under control, deficits are surging, central bank transparency and predictability have declined, sovereign demand is weaker, and investment-grade issuance competes for capital. However, for a diversified portfolio, Treasuries are still the best available hedge against an unexpected recession.
AI trade to moderate, not collapse
Becker is rethinking the AI value chain and expects near-term moderation: a slowdown in frontier-model development would hit the AI trade first, as seen in the rotation out of semis into more defensive sectors. Still, he is not afraid of the AI cycle because CapEx spending remains strong, so the rotation is likely not a multi-year regime change, but hopes for ever-increasing earnings, growth and margins will ease.
Oil can move well above $110
Blanch says the oil market has shifted from a product shortage to an increasing crude shortage after US-Iran clashes around Hormuz, Houthi gains near Bab el-Mandeb, and the attack on Saudi Arabia's East-West pipeline, which had been the market's saving grace and carried roughly 5% of global supply. If the pipeline remains offline for weeks, he expects prices to move well above $110; BofA scenarios average $95 in continued skirmishes, $120 in a protracted war and $150 if critical infrastructure damage becomes permanent, with spot prices potentially much higher. Inventories have been drawn by about 1 billion barrels, and physical Asian crude is trading about $30 above screen Brent.
European gas could spike much higher
Blanch highlights a huge spike in European natural gas to around €85 per megawatt-hour, equivalent to roughly $30 and about $180 per barrel in oil terms. With only about six weeks of inventory builds left going into late October, and a tail risk of a cold or normal winter, he says spot prices could be 50%-100% higher than current levels to clear the market; storage is very low and industry may have to ration or shut down in parts of Europe.
Diesel prices stay very high
Blanch expects diesel prices to stay very high because refining capacity has been damaged or constrained in Russia/Ukraine and the Middle East, Russia has restricted fuel exports, China is struggling to source crude, and only US refiners are running at exceptionally high levels to supply incremental diesel and gasoline. He thinks refining margins stay high for a while and some refinery damage may be permanent or take months to repair.
Buy gold dips; medium-term bullish
Blanch says gold is more connected to rates than oil, so if oil spikes another 20-30%, gold could fall below $4,000 an ounce because higher inflation forces central banks to hike and gold yields nothing. But he remains medium-term bullish and wants to buy dips: massive fiscal deficits and lax fiscal policy remain, and if conflict ends and energy pulls back, governments facing budgetary problems are likely to create more money, especially if an economic slowdown follows, which should drive gold much higher.
Tactically long Treasuries for two months
Cudmore sees a tactical opportunity to be bullish Treasuries over the next couple of months. He argues oil has fresh risk premium but has struggled to break its recent high, so oil risk is now asymmetrically lower; the Fed is over 90% priced for a hike and delivering it should restore credibility and pull down long-end yields; yields are attractive, and the drivers of higher yields are countercyclical, meaning higher yields hurt growth and oil, which ultimately brings buyers back into Treasuries.
Oil risk now skews to downside
Cudmore says that despite bearish oil headlines over the past few days, oil has been unable to break above Thursday's high, meaning a fresh risk premium is already embedded. With the war path uncertain, the asymmetric risk in oil prices is now to the downside.
Bond yield reversal setup from extremes
Cole notes that bond yields are rising globally because labour markets are softening while governments issue more debt to fund investment, and positioning in government bonds is already extremely short. He says central bank meetings this week and any de-escalation in the Middle East could be catalysts for a material reversal in bond yields, though he is not making a high-conviction call.
AI winners may start winning again
Cole says the momentum factor's composition has shifted: AI winners, semiconductors and tech hardware are no longer in the leading momentum loadings after a June-August washout. He thinks this makes the AI trade cleaner, and upcoming earnings will clarify whether what was winning may start winning again.
Luxury vulnerable to weak China, US
Felsted says the Chinese consumer recovery has run out of steam, which is a major worry for luxury brands and leaves them heavily dependent on the US and the wealth effect from US stock markets. If the US falters, luxury could return to a worst-case 2023 scenario where both the US and China slow simultaneously. The luxury reset and new designer excitement has only really worked for Chanel, which handled its designer transition and pricing well, while others have not done as well.
AI infrastructure buildout still mid-innings
O'Shea says the market is pricing two AI trades, and the first is still the infrastructure and financing buildout. Trillions have already been invested in data centers, power and chips, and the economy remains compute-constrained, so he sees this as mid-innings. He expects higher rates will not derail that spending because financing is still being issued even at 8%-10% rates, though spreads have widened. Near-term volatility and digestion are likely, but he remains constructive long term.
Lean into AI application layer
O'Shea says the second AI trade is the integration of AI into companies and sectors outside technology, which is still in early innings. He would lean more into the application/integration layer because the spending there will not go down, and he compares it to prior cloud and mobile buildouts where the winning moat was built around the system, not just the model.
Cybersecurity is AI application moat
Within the AI application/integration layer, O'Shea says cybersecurity, data security and proprietary data sets built around models are likely where the moat will be. He expects security spending to be a key part of the system built around AI models, similar to prior tech cycles.
Core fixed income fails inflation hedge
O'Shea says core fixed income has a role hedging economic growth risks, but the biggest risk now is inflation, and core fixed income will not protect against that. He therefore sees it as less useful for the current inflation-risk regime.
Own real assets as inflation hedge
O'Shea warns that the biggest portfolio risk is inflation, and core fixed income will not protect against it. He says investors are still underallocated to real assets, infrastructure and transport, which should come into play as inflation hedges.
Wary of software loans maturity wall
O'Shea is watching the maturity wall in corporate credit over the next couple of years. He is less worried about high yield bonds and more worried about the loan side, including broadly syndicated loans and direct lending. About 25% of the broadly syndicated loan market matures over the next couple of years, and he is especially wary of software loans coming to market; yields compensate for expected defaults, but that is the area of concern.
Up Next
This Bloomberg Markets video, published September 15, 2026, features Anthony Stevens, Nicholas Becker, Francisco Blanch, Mark Cudmore, Ed Cole, Andrea Felsted, Tom O'Shea discussing IGV, CIBR, Indian IT services, SMH, TLT, XLK, BNO, UNG, HO=F, GLD, WTI, Global government bonds, Luxury sector, AIQ, AI-SECTOR, AGG, PAVE, IYT, Software loans. 19 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Anthony Stevens, Nicholas Becker, Francisco Blanch, Mark Cudmore, Ed Cole, Andrea Felsted, Tom O'Shea · Tickers: IGV, CIBR, Indian IT services, SMH, TLT, XLK, BNO, UNG, HO=F, GLD, WTI, Global government bonds, Luxury sector, AIQ, AI-SECTOR, AGG, PAVE, IYT, Software loans