A rally in giant technology companies drove stocks higher in the Monday session, overshadowing concerns about still-elevated oil prices and bond yields.The S&P 500 rose to a striking distance of a record while the Nasdaq 100 reached a fresh peak. Political upheaval in Europe and fiscal worries drove the euro to its weakest since May 2025, while longer-dated Treasury yields hit multi-decade highs. Markets have absorbed rising rates, high energy costs and renewed inflation concerns, with stocks continuing to advance.For a look at the broader market backdrop, we hear from Carol Schleif, Chief Market Strategist at BMO Wealth Management. She speaks with Bloomberg Businessweek Daily hosts Carol Massar and Norah Mulinda.
Hello, hello. Nice to have you back. How are you?
I'm great. How are you? Happy Monday.
Happy Monday. It's a weird day, but it's interesting to see um, you know, investors kind of liking the US market again uh in some ways. I wanted though to ask you about the higher yield environment if I may start there. I keep thinking about corporate America. You know, in a higher rate environment, sometimes they're forced to make a few more decisions, but how do you see it?
You know, the interesting thing is is we're reminding people that this is really a normalization. It's not necessarily it it feels awful because there's a whole generation that's anchored to zero or or negative interest rates. and yet this is more normal. and it's also, if you peel it back and look at the 95 to 2000 run up, it all happened with 10 year about where it's at now or a little bit higher.
So it's not like we can't do it, but it does force more discipline if you will, more capital discipline, both from the bankers and from
That's good though, right? Discipline is a good thing?
It is super good. Yeah, it's a really good thing because the things that'll pencil out will still pencil out. I was did a big corporate event here last week in Minneapolis for the allied corporate executives group and I was on a panel and it was super interesting because there was a lot of discussion around that and folks afterwards were saying, oh, so maybe I will do that acquisition or maybe I will go ask for that loan because this is more normal. We're not going back to the low rates we had, but it just means everyone puts more
discipline and things have to pencil out.
Carol, I mean we have stocks as we were talking about near all-time high, but you're expecting some choppiness in the next couple weeks. What makes you cautious here?
Yeah, I I think that the aspect of it is there'll be a lot of focus on earnings. I mean, I love earning season because it lets us really dig into the fundamentals, but there'll be a super lot of attention paid to how are margins, because you've got all those cost pressures coming through from supply chain issues, from higher shipping costs, from higher energy costs. Companies have absorbed them for a very long period of time and they're kind of maxing out that capability. and yet, there
you see some with name brand recognition and very solid market share able to pass it along, others aren't. So there'll be a lot of attention to margins. We haven't had a major pullback all year. We had close in the spring when the war started. Not nowhere near as deep as it was last year on liberation day, but it's pretty normal every year to have a 10, 15% sort of macro pull back.
We've had a lot of that under the surface, but we haven't had a macro one and so you could get individual company, individual um sector, if you will, volatility in here and just in investors are primed for it because we're in fourth year of double digit earning or double digit market increases and so people are nervous even though the valuations support where we're at.
What do you make of and I'm going to give credit where it's due and I'm going to give credit to my co-host today and that is Nora who who pointed out um in terms of best performance today, you're looking at materials that are doing really, really well. And I just um I found it interesting. We're talking a lot about tech and I get that, but materials doing well. When you look at market breath and where gains are, um, a good sign, a healthy sign or Yeah.
I think I think it's important to remember because we've all wanted to like summarize the whole move this year up into AI, but it's broader than AI and that's the theme we've been on all year that it's also, you're talking robotics roll out, you're talking about reshoring, you're talking about plant expansion. There's a lot of things at the margin that are benefiting from the tax provisions for businesses written into last year's one big beautiful bill in terms of R&D and um plant and
write-offs of depreciation and things like that that are at the margin bringing stuff along. So materials play into that, construction plays into that. When you look at the mismatch in the labor market, it's because we don't we have what, four or 500,000 open construction and manufacturing jobs because we can't we can't get the people retrofitted into those positions fast enough.
Carol, what do you make of this bond market? We've been talking so much about the bond market volatility and right now I'm seeing the 10 year sitting at about 5.3%. But then earlier we were talking about with a guest uh at Harrison about maybe 6% or even 7% when we think about uh the bond market. Tell me how you're seeing Treasuries right now.
Yeah, I'm hoping we don't go there, but you you've got, we've written on bonds a number of times this year and and a big piece of that has to do with, you know, we were all told 10-year, 4 and a half percent on the 10 year, 5% on the 30 year would be problematic for stocks and they crawled right through those levels and now we're at 5-3 on the 10 year. But a big piece of that is because it's growth that's pulling those rates back up towards normal.
The one thing to keep in mind is the buyers and sellers of bonds are different than they were a decade or two ago because you've got um more volatile holders, more hedge fund players in there, more people focused on the credit side of it rather than or on the interest rate side of it rather than just matching, you know, longer-term liabilities. We had more pensions, more central banks, more things like that invested in it. So you've by nature building a bit more volatility in, which means you
could push rates higher than where fundamentals would have them in a short term, but we do think they'll settle back in. And so this on a 10 year maybe our expectation is a four and three quarters, five and a quarter is probably the range they settle in.
Okay. All right, so that's not 6%. All right. Well though what you say, these Remember these rates are are more normal. Hey, just got about 40 seconds. In your note, you say AI is here whether we are ready or not. But I think about something, go back to the next tech book last tech boom, pets.com is not here anymore. So I just think about for investors, even if AI is here, how should we be exposed to it? Just quickly and just got about 30 seconds.
I think you're you're exposed to it even if you buy a passive index fund because half the index is is related to it. So you're exposed to it whether you want to or not. and we're still trying to figure out who the ultimate beneficiaries are? Is it the leading edge models or is it the users of AI? And so that has yet to be determined and so just having even a passive index fund and you've got exposure.
