After the midterms, the bank podcasts see a bottom, more hikes and new rules

The morning after

The morning after the midterms, the bank podcasts agreed on the shape of the story even while they disagreed on the details. Morgan Stanley's Mike Wilson says the stock market correction is nearly over. Bank of America's strategists say the jobs report points to two more rate hikes. JPMorgan's economists say a Democratic Congress changes fiscal policy, trade and the Fed itself. And a16z's Scott Kupor explains how he is rebuilding the federal workforce from inside the Office of Personnel Management. The election did not settle the argument about rates, spending or AI. It moved it into Congress, the Fed and the agencies. m:…0327 m:…0801 m:…7485 m:…1016

A bottom in sight

Wilson's case, on Morgan Stanley's Thoughts on the Market, is that the market has already priced in the fear around the midterms and AI capital spending, and the correction is nearing its end as the S&P 500 approaches support at 7,100 to 7,300. He advises adding risk on weakness, in quality cyclicals and particularly industrials, where earnings revisions have held up. The numbers behind the call are stark: semiconductor stocks have fallen about 40 percent from their June highs, and the S&P 500 trades at 18 times forward earnings. Wilson keeps a high-conviction view on AI adoption into 2027, with data center spending projected at about 5 percent of consensus S&P 500 revenue, and says the discussion is shifting from productivity talk to measurable cost savings and revenue. His caveat is the Fed: a hawkish central bank could stretch the bottoming process into December. m:…0327

Rates: the jobs report argues for more hikes

Bank of America's team, Aditya Bhave, Stephen Juneau and Katie Craig, led by Mark Cabana, reads the same economy differently. The October jobs report added 165,000 jobs, more than double consensus, with upward revisions to the prior two months, a three-month average of 137,000 and unemployment at 4.1 percent. The team calls the report hawkish and holds to a base case of two more Fed rate hikes, one in December and one in March. On refunding, the team notes the Treasury removed the phrase at least from its forward guidance, which they read as a signal that auction sizes will stay put for the next three to five quarters. The team also says the Fed put for equities is out of the money, and the strong jobs report pushes it further out. The election, in their view, does not change GDP forecasts, but it raises regulatory scrutiny for AI and data centers, even if federal legislation is unlikely. m:…0801

The midterms: what Congress changes

JPMorgan's Bruce Kasman and Derek Shillay describe the midterm result as a blue wave with decisive Democratic majorities in both the House and Senate, and they expect it to force a shift in fiscal policy. Their forecasts include a rollback of planned spending cuts on social benefits, tariff rates rising somewhat next year, and a Congress that is more hawkish on China than the current administration, while also moving to curb or eliminate tariffs on countries such as Canada. A Democratic-led Senate, they argue, will make it harder for the administration to replace Fed members with friendly nominees, increasing personnel turnover, with the Fed chair's term expiring in early 2028. The result also opens the political map for 2028, with Democrats showing strength in traditionally Republican states such as Texas and Kansas. The episode also notes pressure to limit data center build-outs, which could slow tech spending in 2027, and flags Brazil's need for fiscal consolidation as a key uncertainty. m:…7485

The overnight tape: oil, Nvidia and China

The overnight tape, on NAB's Morning Call with Ray Attrill and Phil Dobby, was about oil and a single stock. Brent crude fell 4.9 percent to 93.50 a barrel, and WTI fell 3.6 percent, after signals of de-escalation in the Iran-Israel conflict. Nvidia shares fell nearly 5 percent after reports of an alleged scandal involving chief executive Jensen Huang, while AMD rose more than 12 percent and Broadcom rose 9 percent. China's producer prices rose 5.7 percent year on year, a new cycle high, against weak consumer inflation of 0.7 percent. The hosts also noted the race for the next central bank presidency has narrowed to Klaus Nott and Pablo de Kos, with Nott suggesting stable energy prices would leave little need for further rate hikes. The hosts warned that markets may be looking past underlying risks. m:…3254

The workforce rebuild

The most concrete rebuild in the week's podcasts is not about markets at all. Scott Kupor, a16z's first employee and now director of the Office of Personnel Management, told the a16z Show that the federal government's incentive structure rewards risk aversion over innovation and tenure over merit. The workforce numbers he cites are stark: only 7 percent of federal workers are under 30, against 23 percent in the broader US workforce, and 44 percent are over 50, in a civilian workforce of about 2 million. The workforce has shrunk by 300,000 people since the start of the current administration. His fixes include consolidating 120 HR IT systems into one, which he says will save 95 percent in costs, capping top performance ratings at 40 percent of the workforce, fully automating retirement processing and ending paper submissions, and recruiting technical experts for two-year terms through the TechForce program. He describes the approach as permissioned risk: giving people room to try things in a system built to avoid bad headlines. m:…1016