Oct 14, 2026 · 36 min

Investors weigh resilient growth against inflation and AI risks

How should I be positioned? with Steve Chiavarone (Federated Hermes) and Jason Draho (UBS CIO)

The discussion frames a constructive multi-year equity outlook while testing whether inflation, higher yields, and AI valuations could disrupt it.

3 key takeaways

1Resilient growth, capital investment, and earnings support a constructive market outlook through 2027.
2Inflation, Federal Reserve policy, and higher Treasury yields form the central wall of worry before the midterm elections.
3The guests favor equities and shorter-duration bonds while treating AI as a selective investment opportunity rather than a single trade.

Don't miss

Jason Draho’s bubble warning meets Steve Chiavarone’s more granular view of AI beneficiaries, dividing the theme into developers, infrastructure, and other participants.

The brief

Steve Chiavarone joins Jason Draho to assess a resilient U.S. economy, stronger capital investment, and an earnings outlook they see supporting markets through 2027.

The central tension is a familiar one: inflation, Federal Reserve policy, and higher Treasury yields could unsettle markets even as stronger nominal growth supports equities.

A comparison with the 1990s challenges the idea that valuation multiples should revert automatically to static averages; elevated valuations can persist when growth and policy conditions support them.

The sharpest debate concerns AI: Jason Draho raises bubble parallels with the late 1990s and housing, while Steve Chiavarone separates model developers, infrastructure, and other beneficiaries.

Their multi-year positioning is constructive on equities, cautious on longer-duration fixed income, and selective about AI-related opportunities while inflation risks exceed growth risks.

What was said on this episode

18 statements · 16 positive · 1 negative · 1 neutral

Steve Chiavaroneon S&P 500 earnings and marketsPositive4:30
S&P 500 earnings will grow 15% annually and markets will rise over the next two years
“we see 15% earnings growth in each of the next two years. And we see markets headed higher.”
Listen at 4:30
Steve Chiavaroneon Volatility (finance)Positive4:57
Market volatility should be used to buy rather than sell
“we would view that as an opportunity to buy, not reasons to sell.”
Listen at 4:57
Jason Drahoon U.S. economyPositive5:35
The U.S. economy should remain constructive through 2027
“constructive certainly on the U.S. economy, you know, let's call it, you know, the next 12 months. But even like through the end of 2027”
Listen at 5:35
Steve Chiavaroneon Equity (finance)Positive7:59
Current market concerns will resolve and support higher equity markets
“we believe that all of those concerns are going to be resolved in time. And that's going to provide. let's call it the fuel for equity markets to move higher”
Listen at 7:59
Steve Chiavaroneon S&P 500Positive10:49
S&P 500 valuation is attractive and volatility should be used to add exposure
“we think that's very attractive. And again, we'd use any volatility around these concerns to add.”
Listen at 10:49
Steve Chiavaroneon Market interest ratesNegative14:23
Market interest rates will continue trending higher
“we continue to think that the trend for rates is higher.”
Listen at 14:23
Steve Chiavaroneon Additional Fed rate hikesPositive16:38
One or two additional Fed hikes will not derail equities or the economy
“I don't see that as derailing the equity markets. I don't see that as derailing the economy.”
Listen at 16:38
Steve Chiavaroneon S&P 500Neutral22:48
A 20-times earnings multiple is fair value for the S&P 500
“at 20 times, we think that's a fair value for the S&P.”
Listen at 22:48
Steve Chiavaroneon S&P 500Positive22:54
The S&P 500 target is 10,000 by the end of next year
“we're at 8,500 this year on our S&P target, 26, 10,000 for next year.”
Listen at 22:54
Steve Chiavaroneon S&P 500Positive23:18
S&P 500 earnings and valuation risks are skewed upward
“if anything, I think there's probably risk to the upside, not the downside.”
Listen at 23:18
Steve Chiavaroneon AI investment cyclePositive28:52
The AI investment cycle looks favorable through 2028
“we think that this looks pretty good through 28.”
Listen at 28:52
Steve Chiavaroneon AI investmentsPositive29:09
AI investment demand will not disappear
“we don't see this going away.”
Listen at 29:09
Steve Chiavaroneon Equity (finance)Positive31:02
Investors should overweight equities
“We're overweight equities”
Listen at 31:02
Steve Chiavaroneon Equities and longer-duration fixed incomePositive31:07
Add equities and underweight longer-duration fixed income while inflation risks dominate
“We're going to want to add to equities and remain underway longer-duration fixed income until the risks to growth are greater than the risks to inflation.”
Listen at 31:07
Steve Chiavaroneon Short-duration fixed incomePositive31:56
Cash, ultra-short bonds, and two-year maturities are attractive
“Within fixed income, everything from cash to ultra short to that two-year part of the curve, we find to be particularly attractive.”
Listen at 31:56
Steve Chiavaroneon U.S. and emerging-market equitiesPositive32:13
The U.S. and emerging markets are favored for the build-out
“we tend to like both of those.”
Listen at 32:13
Steve Chiavaroneon Small-cap equitiesPositive32:55
Small-cap equities will continue leading as the economy remains healthy
“We think small caps, having gotten past that with an economy that's doing relatively well, will be positioned to continue to lead.”
Listen at 32:55
Steve Chiavaroneon Equity (finance)Positive34:09
Investors should buy equity-market weakness
“we would be buyers of weakness on the equity side.”
Listen at 34:09

Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.