Sep 17, 2026 · 52 min
Rate hikes test markets as Hormats urges a new U.S. strategy
The Fed Hikes Rates
The episode connects persistent inflation and higher yields to a broader debate over alliances, China competition, and America’s capacity for long-term strategy.
- 1Global rate hikes could keep Treasury yields elevated while pressuring equity valuations, earnings, and market leadership.
- 2Savita Subramanian sees risks from higher yields, tougher comparisons, and an AI buildout that may cost more and take longer.
- 3Bob Hormats argues that stronger alliances, selective pressure, and cooperation with China are essential to managing emerging security risks.
Don't miss
Bob Hormats proposes an Eisenhower-style Solarium review to rebuild U.S. strategy around alliances, domestic capacity, and selective cooperation.
The brief
Global central-bank tightening is making the path for stocks bumpier, with higher Treasury yields, shifting leadership, and renewed concern about earnings and inflation.
Julian Emanuel sees the long-term bull market intact, but Savita Subramanian remains cautious as higher yields, tougher comparisons, and costly AI investment test equity optimism.
The inflation debate turns on whether strong nominal growth will persist long enough to require multiple additional Fed hikes, exposing the limits of long-range forecasts.
Bob Hormats shifts the focus from markets to statecraft, arguing that weaker alliances and rising competition with China demand a renewed long-term American strategy.
His proposed answer combines stronger alliances, pressure on adversaries, cooperation where interests overlap, and a strategic review modeled on Eisenhower’s Solarium project.
What was said on this episode
25 statements · 8 positive · 13 negative · 3 mixed · 1 neutral
Global central-bank hikes make stocks struggle, but do not end the bull market.
“when global central banks are hiking, you know, stocks have a more difficult time. The bull doesn't die and we don't think it dies now. But the road ahead is bumpy.”
Listen at 2:43
Lower oil prices reduce long-term yields and improve stocks through easier hyperscaler debt issuance.
“Oil pressuring the 10 year yield, 10 year yield pressuring the ability for hyperscalers to issue debt. OK, you've sort of got the release valve here. That's why stocks are doing better. That's why long end yields are lower.”
Listen at 4:25
Equities remain on a strong earnings-driven growth trajectory through 2027.
“we're still at a fantastic earnings-driven growth trajectory into 2027.”
Listen at 5:53
The long-term equity bull market remains intact.
“long term, the bull is intact here”
Listen at 6:56
Long-term Treasury yields face greater upside than downside risk.
“there is more upside risk than downside risk with long-term Treasury yields.”
Listen at 10:19
Long-term yields are unlikely to decline significantly from current levels.
“it's going to be difficult to see yields move significantly lower from here.”
Listen at 11:15
A 5% ten-year Treasury yield is reasonable for strong nominal growth.
“I think 5% seems pretty reasonable.”
Listen at 12:10
Investors should maintain below-benchmark average bond duration.
“We actually suggest a below benchmark average duration.”
Listen at 13:19
Investment-grade and high-yield credit have favorable outlooks.
“We have a favorable outlook on credit. Both investment grade and high yield.”
Listen at 16:19
Hyperscaler leverage and capital intensity generally cause valuation multiple compression.
“They're getting more capital intensive. They're less asset light and they spend less on R&D and buybacks and more on physical capex, which is generally a reason to expect multiple compression.”
Listen at 19:05
Technology and semiconductor margins may compress next year.
“What I worry about from here, less so maybe for tech, maybe semis, I think they're talking about this, is just margin compression next year.”
Listen at 19:31
An earnings slowdown is almost inevitable.
“The earnings slowdown itself is almost inevitable.”
Listen at 20:42
Forecast earnings growth will slow from 30% to 15%.
“the slowdown that we're forecasting is from 30% to 15%.”
Listen at 20:53
Small-cap companies may struggle because of greater refinancing risk.
“Small caps might have a harder time. They've got more refinancing risk in some areas of leverage.”
Listen at 22:29
Future S&P returns will be lower than those of the past decade.
“the run rate for S&P returns from here. is lower than what we've enjoyed over the last 10 years”
Listen at 24:07
Large financials and energy have clean balance sheets and capital discipline.
“Large financials and energy look clean, capital discipline, like kind of the opposite of tech.”
Listen at 24:51
The AI buildout may take longer than expected and encounter setbacks.
“it might take longer than what everyone's expecting and there might be little hiccups along the way”
Listen at 25:39
The AI build cycle may take longer and cost substantially more.
“It might just take longer and cost a lot more.”
Listen at 26:06
The U.S. economy may be entering an inflationary boom.
“we're flirting here with, dare I say, an inflationary boom.”
Listen at 27:03
Investors should prepare for more Federal Reserve rate hikes.
“You should adjust to more.”
Listen at 29:27
China is strengthening partnerships while the United States weakens relationships with traditional allies.
“The Chinese are strengthening their relationships. With Russia, with Iran, with Ukraine and the global south, we're weakening our relationships with the countries that were part of our bulwark in dealing with the Soviets during the Cold War.”
Listen at 36:50
The United States and China should cooperate to minimize AI risks from rogue and autonomous actors.
“we do need to find ways of minimizing risk, minimizing risk with respect to rogue actors. Chinese are worried about that. So are we.”
Listen at 38:34
The United States should develop defensive measures against AI and biotech terrorism risks.
“what we need to do, I think, is work on defensive measures”
Listen at 44:00
The United States needs a functional and effective domestic system.
“we need to make sure that our internal system is functional and effective.”
Listen at 47:09
The United States should preserve alliances and increase pressure on hostile countries.
“you still need that alliance and third right you need to figure out ways of putting more pressure on the countries that are really adverse to our interests.”
Listen at 47:48
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.
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