Oct 14, 2026 · 43 min
Rising yields test the AI-led stock rally
Rising Yields & Rally Risk: The Investment Committee's Strategy 10/14/26
Hotter inflation and tighter financial conditions are challenging the market’s concentrated leadership while raising fresh questions about AI spending, banks, housing, and defense demand.
- 1Higher yields are pressuring megacap technology, semiconductors, small caps, banks, and other crowded areas of the market.
- 2The panel debates whether AI capital spending can keep accelerating without clearer evidence that banks and businesses are monetizing those investments.
- 3Defense production offers a durable demand story, even as suppliers, funding, and contract execution constrain the industry’s expansion.
Don't miss
Lockheed Martin’s Jim Taiclet and Michael Duffy outline the push to expand missile production while confronting supply-chain and funding bottlenecks.
The brief
Hotter inflation and rising Treasury yields are tightening financial conditions just as concentrated megacap leadership, semiconductors, banks, and small caps begin to weaken.
Joe Terranova and Liz Thomas debate whether the pullback is a healthy reset or an early warning that the AI capital-spending cycle may be plateauing.
The committee’s trades reflect a cautious rotation: trimming Bank of America, adding Wells Fargo, and selling Netflix while considering defense, power, and precious metals.
Lockheed Martin’s Jim Taiclet and Michael Duffy describe plans to expand missile and interceptor production, but supply-chain bottlenecks and funding remain central constraints.
The episode closes with higher mortgage rates pressuring housing, logistics weakness ahead of J.B. Hunt earnings, and final trades spanning Treasuries, defense, healthcare, and pharmaceuticals.
What was said on this episode
34 statements · 13 positive · 18 negative · 3 mixed
Market concentration in a small stock basket makes the market unhealthy.
“I believe this is an unhealthy market because we're relying on a very small, concentrated basket of stocks to carry us and carry us through the earnings season.”
Listen at 1:27
Rising yields make debt-market funding for AI buildout more difficult.
“rising yields present the challenge in terms of accessing the debt markets to fund the build out for AI.”
Listen at 1:42
CoreWeave’s distressed bonds signal risk for its debt-dependent business.
“the bonds trading on 80 cents on a dollar. That's troubling for one of the original neoclouds that is so reliant on the debt market.”
Listen at 2:17
A 5%–10% market pullback would be healthy.
“if it were to come in 5% to 10%, that would be healthy, in our opinion.”
Listen at 4:08
A lower reset in major technology stocks would benefit the market.
“I think it would be better if it resets the market. Somewhat lower.”
Listen at 4:49
Markets may struggle through midterms but could rally late in the year.
“I think through midterms we're still struggling. Towards the end of the year I think there's a big possibility. if not probability for a relief rally.”
Listen at 7:42
Stephanie Link recommends reducing Bank of America and increasing Wells Fargo.
“I'm trimming pretty big time Bank of America and I'm adding to Wells Fargo.”
Listen at 9:07
Bank of America is losing some market share.
“I think they're losing a little bit of share.”
Listen at 9:44
Wells Fargo’s CEO is successfully shifting the company from defense to offense.
“I do think that the CEO is doing a really commendable job going from defense to offense.”
Listen at 10:52
Banks have not reported substantial AI-generated revenue.
“no one has mentioned that they are starting to generate substantial revenue as a result of using a lot of AI.”
Listen at 11:23
Banks have not demonstrated earnings or profitability from AI spending.
“no one has talked about how they're generating. earnings and profitability from it.”
Listen at 11:42
Goldman Sachs and Morgan Stanley will be difficult stocks to hold over six to nine months.
“I'd say for the next six months, maybe nine months, these are going to be very tough stocks. to hold.”
Listen at 12:40
Rising rates will particularly hurt Russell small-cap stocks.
“the IWM, which is the Russell. Small cap stocks will be particularly hard hit with rising rates”
Listen at 12:59
Higher rates are inversely correlated with general equity performance.
“there's an inverse correlation to how equities perform generally.”
Listen at 13:36
Investors should not put new money into the market now.
“I don't believe it's now the time to put new money in the market”
Listen at 14:25
State Street fell because it slightly missed elevated expectations.
“This is a classic example of a stock that had really high expectations and slightly missed. And that's the reason it's down.”
Listen at 15:52
Chip stocks may decline by about 30%.
“Maybe they'll be off 30 percent.”
Listen at 18:20
Trimming chip stocks is reasonable, but they will likely recover after a decline.
“I think that trimming is fine, but... The stocks will probably come back once they've hit a level that people, again, feel comfortable.”
Listen at 18:50
Semiconductor stocks may be signaling a peak in the AI CapEx cycle.
“Are the stocks telling you that the CapEx cycle is peaked”
Listen at 19:22
Flatlining semiconductor spending would drive further valuation resets.
“valuations will be reset even further.”
Listen at 19:47
Steve Weiss continues holding Taiwan Semiconductor and NVIDIA.
“I'm still sticking with Taiwan Semi as one of my largest positions and also holding on to NVIDIA.”
Listen at 19:55
Semiconductor fundamentals have not yet materially deteriorated.
“there haven't been fundamental deterioration factors that have come in yet.”
Listen at 20:49
Current evidence does not justify a strongly bearish semiconductor view.
“it's difficult to get really all that bearish on the semiconductor complex.”
Listen at 21:36
Strong Magnificent Seven earnings could revive the bull market by late October.
“We could very easily see that. at the back end of October that you hear from the MAG-7 and others, and they kind of revive the bull market that's been in place for the better part of this year.”
Listen at 23:08
Current positioning and higher yields could cause further equity selling.
“what's in front of you right now could lead to further selling pressure”
Listen at 23:21
Netflix is unlikely to generate attractive returns for Steve Weiss.
“I think it's dead money.”
Listen at 35:01
Streaming companies will struggle as streaming prices rise.
“I think all the streamers are going to have a tough time going forward, particularly as they raise prices on virtually all the streaming services.”
Listen at 35:17
NextEra has a long growth runway from expanding U.S. power generation.
“NextEra is the play on more power. We need power generation in this country. They are the largest. builder of new power, and we therefore think there's a long runway to go.”
Listen at 35:45
Central-bank demand will support a gold rebound before year-end.
“central banks will continue to have demand for gold. And we're going to see gold perk up again before year end.”
Listen at 36:20
CPI, rates, and credit conditions are disrupting the AI technology trade.
“a little bit of sand in the gears on that trade from CPI, from rates, and I think credit most of all”
Listen at 37:26
J.B. Hunt has a favorable earnings setup because expected contraction is already anticipated.
“the setup is a positive one for J.B. Hunt going into tomorrow because we've gotten in front of what we expect to be the contraction in earnings.”
Listen at 39:53
The 10-year Treasury offers an attractive entry point despite further rate increases.
“While I think rates will continue to rise, this is a pretty good entry point and a great return.”
Listen at 41:38
Aerospace and defense stocks retain upside because the war continues.
“the war isn't over, so it has opportunity.”
Listen at 41:54
Thermo Fisher has finally broken out after years of weakness.
“This stock has finally broken out.”
Listen at 41:58
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.