Labor market focus, bond market outlook (with Romaine Bostick, Katie Greifeld)

Yields cautious down , medium term, interviewee explicit

explicit

NDX cautious up , medium term, interviewee implicit

implicit

RUT

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Morgan Stanley 8.4
Investment Bank $1600.00B
Andrew Szczurowski 8.5

Labor market focus, bond market outlook (with Romaine Bostick, Katie Greifeld)

yields

the Fed will be looking to push against with further rate cuts, more than the market is pricing in for 2026 Labor market weakness (reasonable growth without job/wage gains) will be the Fed's sole focus, leading to more cuts than expected.

12/8/2025 1:14:06 PM	medium term cautious down	20 days later	-1.67%	+0.84%
12/2/2025 9:28:55 PM	medium term cautious down	20 days later	+2.76%	-1.38%
11/28/2025 6:46:36 PM	medium term down	21 days later	+1.78%	-1.78%
11/25/2025 12:34:15 AM	medium term down	20 days later	+3.78%	-3.78%
11/22/2025 1:57:04 AM	medium term cautious down	21 days later	+3.57%	-1.78%
11/14/2025 8:08:25 PM	short term cautious down	7 days later	-2.30%	+1.15%
11/12/2025 1:48:25 PM	short term cautious down	5 days later	+0.27%	-0.13%
11/4/2025 2:20:08 PM	medium term cautious down	20 days later	-3.73%	+1.86%
11/3/2025 5:11:21 PM	medium term cautious down	20 days later	-1.25%	+0.62%
10/21/2025 3:40:54 PM	short term cautious down	5 days later	+1.11%	-0.56%
9/24/2025 2:05:49 AM	short term cautious down	5 days later	-0.58%	+0.29%
9/17/2025 8:50:18 PM	medium term cautious down	20 days later	+0.61%	-0.30%
9/8/2025 7:17:58 PM	short term cautious down	6 days later	-0.98%	+0.49%
9/4/2025 5:07:54 PM	medium term cautious down	20 days later	+2.10%	-1.05%
8/12/2025 6:27:35 PM	short term cautious down	5 days later	+2.43%	-1.22%
8/5/2025 10:59:28 PM	medium term down	20 days later	+0.90%	-0.90%
8/5/2025 2:12:54 PM	short term cautious down	5 days later	+1.26%	-0.63%

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Asks which report (jobs or CPI) will guide investor sentiment more.

Romaine Bostick
Andrew Szczurowski

Short term, CPI report will be the focus. Long term, the bond and risk markets will focus on the labor market.

Over the short term, inflation is a problem, but a year from now, inflation won't be a problem. The 'tariff inflation' pig moving through the python won't be an issue in 6-12 months, allowing Fed to focus solely on labor.
Asks about actual economic growth outlook for 2026.

Romaine Bostick
Andrew Szczurowski

We might be entering a unique era of reasonable GDP growth (~2%) that doesn't translate to labor growth.

AI spending and capex contribute to GDP but not labor. A fear for 2026 is reasonable growth with no labor growth, leading to stagnant wages. The Fed will push against this with further rate cuts, more than the market is pricing.
Asks how to structure a portfolio around economic growth without labor growth.

Katie Greifeld
Andrew Szczurowski

Not the worst thing for risk assets; it's a productivity boom. On the bond side, avoid AI data center deals, stick to high-quality agency mortgages and treasuries.

Companies spending on AI/data centers partly replaces labor, which is good for investors. Bond investors don't get the upside in AI data center deals. High-quality agency mortgages are attractive because spreads are wide due to Fed QT on mortgages and housing unaffordability.
Asks where in the credit market you aren't paid enough for credit risk.

Katie Greifeld
Andrew Szczurowski

In IG corporates, you're being compensated for credit risk because base Treasury yields are high, not through spreads. Spreads could stay tight like 2004-2006.

Favorite space is commercial mortgage-backed securities (CMBS)/commercial real estate, which has been beaten up. Opportunities for alpha are fewer and farther between.
Asks for the argument favoring mortgage-backed and asset-backed securities for risk-adjusted safety.

Romaine Bostick
Andrew Szczurowski

Fed QT on mortgages keeps agency MBS spreads wide, a positive technical. Asset-backed markets don't have the same dedicated flows as IG corporates.

Flows into bond funds are driven by attractive yields (5-6% start of year, real yield 3+%). People bought credit for yield, not spreads. Expect spreads to continue to grind tighter in asset-backed space in 2026.

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