Oct 13, 2026 · 42 min

Markets weigh normal yields against AI-era credit risks

Markets, Earnings, and Oil

The episode tests whether rising bond yields signal healthier growth or expose vulnerabilities in credit, equities, energy infrastructure, and AI financing.

3 key takeaways

1Ed Yardeni sees bond yields reflecting normalized nominal growth, while credit markets remain the likeliest source of instability.
2Lori Calvasina expects a possible equity pullback despite supportive earnings, with breadth, valuations, positioning, and small-cap quality in focus.
3Middle East shipping disruptions could pressure refinery repairs and global diesel supplies, adding an energy risk to the market outlook.

Don't miss

Ed Yardeni’s bullish productivity outlook is tested against the possibility that speculative AI financing could create credit-market trouble.

The brief

Ed Yardeni argues that bond yields reflect a return to normal, guided by nominal growth rather than a simple higher-for-longer rate regime.

Yardeni remains optimistic about productivity, earnings, and technology-led expansion, but says credit markets—not necessarily equities—usually reveal the next serious excess.

Lori Calvasina sees room for a modest equity pullback as investors weigh earnings, valuations, positioning, technology exposure, and the quality of smaller companies.

Energy analysis turns to attacks, refinery repairs, and shipping disruptions near the Strait of Hormuz and Bab el-Mandeb, with global diesel supplies at stake.

The episode closes with Fambot, an AI chief-of-staff service that organizes family messages, calendars, and activities while raising questions about privacy and automation.

What was said on this episode

23 statements · 10 positive · 9 negative · 2 mixed · 2 neutral

Ed Yardenion U.S. overnight interest ratesNeutral4:02
Current bond yields represent a return to normal rates, not higher-for-longer rates.
“I think it's normal for longer. We're back to normal rates.”
Listen at 4:02
Ed Yardenion Nominal GDP growth and bond yieldsNeutral4:46
Nominal GDP growth is a guide for determining appropriate bond yields.
“One of my guideposts for trying to figure out where bond yields should be is to look at the growth rate of nominal GDP”
Listen at 4:46
Ed Yardenion China’s banking systemNegative7:21
China’s bank restructuring has not solved its bad-loan problem.
“China just recently restructured its banks. It took all of its rural banks and folded them into their... into large banks that doesn't mean that that solves the problem not at all there's still all those bad loans”
Listen at 7:21
Ed Yardenion China’s economyNegative8:22
China is experiencing stagnant retail sales, deflation, and falling home prices.
“Retail sales growth is absolutely zero in both nominal and real terms. There's a lot of signs of deflation. Home prices are still falling.”
Listen at 8:22
Ed Yardenion 2020s technology-led productivity boomPositive9:51
The 2020s are experiencing a technology-led productivity boom.
“I think we are in the roaring 2020s with a technology-led productivity boom.”
Listen at 9:51
Ed Yardenion Corporate earningsPositive10:08
The economy is currently experiencing an earnings boom.
“there's no doubt that we're in a earnings boom.”
Listen at 10:08
Ed Yardenion 2030s economic expansionPositive11:02
A technology-led expansion could produce a “Roaring 2030s.”
“I may conclude that we're going to have the roaring 2030s if this works out.”
Listen at 11:02
Ed Yardenion U.S. productivity growthPositive12:10
U.S. productivity growth will rise from about 2% to 3–4%.
“My base case, of course, is that productivity, which is right now growing around 2%, is going to go to 3% to 4%”
Listen at 12:10
Ed Yardenion U.S. economy and stock marketPositive13:21
The U.S. economy and stock market perform well despite Washington policy problems.
“it's amazing how well the u.s economy and stock market do despite despite washington”
Listen at 13:21
Ed Yardenion Global economy and stock marketsPositive14:06
Economies and stock markets have remained resilient despite recent oil-price spikes.
“it's amazing how well the US economy, global economy and stock markets have done despite the latest spike in oil prices.”
Listen at 14:06
Ed Yardenion AI financingNegative15:10
Credit markets, particularly AI financing, contain speculative excesses.
“the credit markets is is sort of the area where you get your speculative excesses and Certainly in the AI field. There's a speculative excesses going on with all the financing that's happening there.”
Listen at 15:10
Ed Yardenion Banks’ involvement in speculative excessesPositive15:32
Banks are less involved in current excesses than during the global financial crisis.
“I don't think that the banks are as involved in all the excesses as they were back then.”
Listen at 15:32
Ed Yardenion AI industryPositive15:43
The AI community would quickly address a major AI-sector failure.
“This time around, let's say something blows up in the AI field. I think you'll see the AI community. rushing to shore the problem up.”
Listen at 15:43
Ed Yardenion Federal Reserve dot plotPositive16:36
The Federal Reserve’s dot plot should be retained.
“Please, don't take it away. I mean, I need it.”
Listen at 16:36
Lori Calvasinaon S&P 500Negative21:17
The S&P 500 may experience a 5–10% pullback toward 7,000–7,400.
“we've been looking for a 5% to 10% drawdown, what we call a tier one, you know, sort of pullback in the S&P 500”
Listen at 21:17
Lori Calvasinaon 2027 EPS forecastsNegative22:37
2027 EPS forecasts may require a 10% reduction.
“In my own modeling, I've been baking on a 10 percent haircut.”
Listen at 22:37
Lori Calvasinaon Russell 2000Mixed24:35
Russell 2000 valuations are somewhat cheap but not deeply compelling.
“valuations have kind of gotten down to the Iran war lows, but they haven't really gotten washed out. So they're a little bit cheap. They're not deeply compelling.”
Listen at 24:35
Lori Calvasinaon Small-cap stocksNegative24:57
Additional rate hikes could hurt small caps and the broadening trade.
“until we sort of become convinced that we aren't going to be pricing in additional hikes, small caps and kind of that broadening trade, I think, could potentially have a problem.”
Listen at 24:57
Lori Calvasinaon Russell 2000 companiesPositive26:01
Investors should avoid treating all Russell 2000 companies as low quality.
“I think we have to be a little bit careful of kind of painting the whole Russell with a broad brush.”
Listen at 26:01
Lori Calvasinaon Saudi Arabia’s energy infrastructureNegative27:46
Attacks damaging Saudi infrastructure threaten global energy markets.
“if fundamentally it's under attack and actually its refineries are damaged and some of its energy infrastructure is damaged, the biggest producer in the Middle East is under a huge amount of threat.”
Listen at 27:46
Lori Calvasinaon Damaged oil refineriesNegative29:12
Repairing a damaged refinery is not a quick process.
“it's really not a quick thing to turn around a refinery where, you know, actually you might have damage.”
Listen at 29:12
Lori Calvasinaon Shipping traffic through Strait of Hormuz and Bab el-MandebMixed30:33
Shipping-flow data around regional straits is reasonable but partly guesswork.
“So the data that we're getting is reasonable. But you're absolutely right. It's a bit of guesswork versus actually all of those ships moving backwards and forwards with their transponders on.”
Listen at 30:33
Lori Calvasinaon Russian diesel suppliesNegative31:42
Additional Russian diesel supplies may have limited market impact.
“you've really got to question how much of a difference it's going to make.”
Listen at 31:42

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.