November CPI Weakness Masks Resilient Economy and AI Growth - Episode Hero Image

November CPI Weakness Masks Resilient Economy and AI Growth

Bloomberg Surveillance · · Listen to Original Episode →
Original Title:

TL;DR

  • The November US CPI report is artificially weak due to condensed survey periods and lack of seasonal adjustments for holiday discounting, suggesting a likely bounce-back in December data.
  • The labor market is showing resilience and potential upward inflection, with private payroll numbers near 70,000, indicating a stronger underlying trend than headline figures suggest.
  • Elevated AI stock valuations, around 22.5 times forward earnings, are supported by strong corporate earnings growth and macro tailwinds like tax provisions and energy prices.
  • Money market funds, holding over $7 trillion in cash, may see yields disappear as interest rates potentially decline, prompting a shift towards income-generating assets.
  • The merger of Trump Media with TAE Technologies positions TAE as a potential leader in nuclear fusion, leveraging political backing and capital for an "arms race" against China.
  • Monetization of AI use cases and accelerated enterprise adoption, particularly within Microsoft's Azure, will define winners in the tech space through 2026.
  • Warner Brothers seeks stronger personal guarantees for a deal, highlighting concerns over the backing of the Ellison family trust due to the revocable nature of its assets.
  • Wealthy renters are undertaking significant renovations, spending up to $2 million on customizations, indicating a trend where landlords benefit from increased property value.
  • New research suggests pet ownership may precede parenthood rather than replace it, acting as a trial run for the responsibilities and costs of raising children.

Deep Dive

The November US CPI report surprised with a weaker-than-expected inflation reading, but this data is likely distorted by seasonal sampling biases and government shutdown impacts, suggesting inflation may rebound in December. Consequently, the Federal Reserve is expected to maintain its current interest rate stance for a significant portion of the upcoming year, as the economy is anticipated to strengthen and inflation may prove more persistent than this single report indicates.

The labor market, conversely, shows resilience and potential for further improvement, with private payroll numbers indicating a healthy trend. While the headline unemployment rate saw an increase, this is partly attributed to data anomalies rather than fundamental weakness. This robust labor backdrop, coupled with tailwinds from legislative provisions and stable energy prices, supports a bullish outlook for corporate earnings in the US, which are projected to grow significantly in the coming year. This contrasts with European markets, where strong stock performance has not been matched by equivalent earnings growth, suggesting a potential disconnect. The market's current focus on momentum and sentiment over fundamental quality may present an opportunity for investors to shift towards quality and dividend-growing stocks, particularly as money market yields are expected to decline.

Separately, the proposed merger between Trump Media & Technology Group and TAE Technologies signals a strategic move into the nuclear fusion business, with TAE Technologies seen as the core value driver due to its established breakthroughs and strong backing. This venture is framed within a broader global "arms race" for technological dominance, particularly against China, with energy and advanced technologies like AI and fusion identified as critical future battlegrounds. The merger aims to provide TAE with significant capital and political backing, accelerating its development of fusion power, which is viewed as essential for meeting future energy demands and supporting the significant power requirements of AI infrastructure.

In media, Warner Bros. Discovery is seeking stronger personal guarantees from potential investors, specifically concerning the financial backing of the Ellison family trust, due to concerns about the trust's reliance on Oracle stock. Concurrently, a major shareholder is exploring the sale of cable TV assets, indicating a potential shift in the traditional media landscape.

Finally, research suggests that pet ownership may precede, rather than replace, human parenthood, with pets serving as a "trial run" for potential parents. This finding challenges the notion that increased pet adoption directly correlates with declining birth rates.

Action Items

  • Audit CPI data collection: Identify and document 3-5 specific data sampling or seasonal adjustment issues that may have artificially weakened the November report (ref: Stephanie Ruhle's commentary).
  • Track labor market indicators: Monitor 5-10 private payroll and unemployment rate data points over the next 2-3 months to confirm or refute the observed inflection higher (ref: Stephanie Ruhle's commentary).
  • Evaluate AI monetization strategies: For 3-5 key AI players (e.g., Microsoft, Nvidia), analyze their Q1 2026 earnings reports for specific monetization metrics and use cases (ref: Dan Ives' commentary).
  • Assess fusion technology viability: Track 2-3 key milestones or breakthroughs from TAE Technologies over the next 1-2 years to validate its long-term potential (ref: Dan Ives' commentary).

Related Episodes

Key Quotes

"I think the main thing that we have to remember is there is a lot of error in this report so I would not take much away from this a key thing that there's there's an issue with in the sense that when they're sampling the data specifically around November that the survey period was was condensed into later in the month when you typically have significant holiday discounting and when we spoke with BLS they said they're not doing anything to adjust those seasonals so that automatically makes the data artificially weak and we're probably going to see a bounce back in December."

Stephanie Ruhle explains that the November US CPI report likely contains significant errors due to survey timing during holiday discounting periods. Ruhle suggests that seasonal adjustments were not made, which artificially weakened the data, and anticipates a rebound in the December report.

"I think what we're seeing is a labor market that's holding up a lot better and in fact starting to to inflect a bit higher from here and I think that's the main conclusion that we should take away from the the the headline jobs numbers let me let me refrain from the private payrolls numbers the headline jobs numbers are impacted again by uh not necessarily the government shutdown in particular but the the deferred resignation program which ended in at the end of September these were people who took severance packages this is not people who lost their jobs so if you look at the private payroll numbers they were actually quite decent."

Stephanie Ruhle indicates that the labor market is performing better than headline numbers suggest, attributing this to factors like a deferred resignation program rather than widespread job losses. Ruhle points out that private payroll numbers were "quite decent," implying underlying strength not fully captured by the main figures.

"We have long recognized the fact that over time stock prices follow profits it's pretty simple the challenge of course this year is quality's honestly been left in the dust this year has been all about momentum it's been about technicals it's been about finding a chart that's going up."

Emily Roland states that historically, stock prices correlate with company profits, but this year has seen a divergence where momentum and technical chart patterns have driven market performance over fundamental quality. Roland notes that quality stocks have been overlooked in favor of those with upward price trends.

"The valuations are elevated around 22 and a half times forward earnings of course the peak historically was 24 but what we're really focused on is the denominator um of the PE ratio it's earnings and the earnings engine in the United States is on we have a lot of tailwinds in the next year we've got the provisions from the one big beautiful bill we've got energy prices close to support here that helps consumers so there's a lot going right for corporate America."

Emily Roland acknowledges that current market valuations are high but emphasizes that the earnings component of the P/E ratio remains strong. Roland identifies several tailwinds for U.S. corporate America in the coming year, including legislative provisions and supportive energy prices, suggesting a positive outlook for earnings.

"I think when it comes to nuclear fusion what that's 25 plus years you know in terms of the max the maxwell winners the nobel winners that they've had here so I've always viewed this is going to be if there's a winner in the us and global nuclear fusion it's T A E so I think that's the centerpiece of this whole deal it's much more about T A E in my view then in terms of on the trump angle."

Dan Ives views T.A.E. as the central element of the Trump Media merger, highlighting its significant scientific backing and potential for success in nuclear fusion over the next 25 years. Ives believes T.A.E.'s established expertise and Nobel laureates make it the most promising contender in the global fusion race.

"I think it's all to it's monetization of AI right and in other words it's the build out what do use cases look like not just on the enterprise and on the consumer side and it will get to race right like from meta to microsoft to you know whoever from a cap back perspective that continues to be the focus the monetization and I think that's really going to define the winners quickly."

Dan Ives identifies the primary focus for 2026 in the tech space as the monetization of Artificial Intelligence, including its practical applications across enterprise and consumer sectors. Ives suggests that companies' ability to generate revenue from AI will be the key differentiator in determining market winners.

Resources

External Resources

Books

  • "Chip War" - Mentioned as a fabulous book that showed how discreet and apart Micron of Idaho is.

Articles & Papers

  • "Money Stuff" (Bloomberg) - Mentioned for explaining the revocable trust from the Ellison family.

People

  • Dan Ives - Global Head of Tech Research at Wedbush Securities, discussed regarding Trump Media & Technology Group's announced merger with TAE Technologies and the state of Mag 7 and technology.
  • Emily Roland - Co-Chief Investment Strategist at Manulife John Hancock Investments, discussed why AI and macro tailwinds support a bullish outlook for US equities into 2026.
  • Stephanie Ruhle - Discussed regarding the November US CPI report and its implications.
  • Tom Keene - Host of Bloomberg Surveillance.
  • Paul Sweeney - Host of Bloomberg Surveillance.
  • Lisa Mateo - Provided the latest headlines in newspapers across the US.
  • David Rosenberg - Mentioned for his disinflationary call.
  • Myron - Mentioned in relation to government shutdown and data.
  • Waller - Mentioned as a potential pick for the Fed.
  • Hasset - Mentioned as a potential pick for the Fed.
  • Margie Patel - Mentioned in relation to dividend growth.
  • Larry Ellison - Mentioned in relation to the use of an Ellison family trust to backstop a deal.
  • Sue Kim - Founder of New York hedge fund Standard General, mentioned as being in talks for buying or investing in Warner Brothers' television networks.
  • Matt Levine - Author of Bloomberg's "Money Stuff" column, mentioned for explaining the revocable trust from the Ellison family.
  • Laura Martin - Mentioned as having suggested shutting down traditional TV products.

Organizations & Institutions

  • Bloomberg Surveillance - Podcast and radio show.
  • Wolfe Research - Mentioned for Stephanie Roth, Chief Economist.
  • Manulife John Hancock Investments - Mentioned for Emily Roland, Co-Chief Investment Strategist.
  • Wedbush Securities - Mentioned for Dan Ives, Global Head of Tech Research.
  • Trump Media & Technology Group - Mentioned in relation to its announced merger with TAE Technologies.
  • TAE Technologies - Mentioned in relation to its announced merger with Trump Media & Technology Group and its work in nuclear fusion.
  • BLS (Bureau of Labor Statistics) - Mentioned in relation to data sampling for inflation reports.
  • Merrill Lynch Pierce Fenner and Smith (Merrill) - Mentioned in relation to David Rosenberg.
  • Merill Lynch - Mentioned in relation to David Rosenberg.
  • Pro Football Focus (PFF) - Mentioned as a data source.
  • NFL (National Football League) - Mentioned in relation to sports discussion.
  • New England Patriots - Mentioned as an example team for performance analysis.
  • Google - Mentioned as a backer of TAE Technologies.
  • Chevron - Mentioned as a backer of TAE Technologies.
  • Goldman - Mentioned as a backer of TAE Technologies.
  • Nvidia - Mentioned in relation to AI build-outs and the US being ahead of China in technology.
  • Microsoft - Mentioned in relation to AI build-outs and being a core winner in enterprise AI.
  • Palantir - Mentioned in relation to the US being ahead of China in technology.
  • Aqua - Mentioned in relation to nuclear energy.
  • AMD - Mentioned in relation to AI build-outs.
  • Meta - Mentioned in relation to AI monetization.
  • Oracle - Mentioned in relation to data centers and its shares being part of an Ellison family trust.
  • Lawrence Livermore Lab - Mentioned in relation to nuclear fusion research.
  • Kleinman Center for Energy Policy at the University of Pennsylvania - Mentioned for providing information on fusion power plants.
  • Sorbonne - Mentioned for a proposed power plant chart from 1915.
  • Warner Brothers - Mentioned in relation to a deal and seeking more information about an Ellison family trust.
  • Wall Street Journal - Mentioned for reporting on Warner Brothers seeking more information about an Ellison family trust.
  • Financial Times - Mentioned for reporting on a Warner Brothers shareholder reaching out to an investor.
  • CNN - Mentioned in relation to potential asset sales by Warner Brothers.
  • TNT - Mentioned in relation to potential asset sales by Warner Brothers.
  • Discovery - Mentioned in relation to potential asset sales by Warner Brothers.
  • Standard General - New York hedge fund mentioned for its founder Sue Kim.
  • MIT - Mentioned in relation to Dr. Money's association.
  • The Advance Act - Mentioned in relation to accelerating deployment of versatile advanced nuclear for clean energy.
  • Micron - Mentioned in relation to optimism about its performance and AI build-outs.
  • European Equities - Mentioned in relation to earnings growth.
  • European Financial Stocks - Mentioned in relation to earnings growth.
  • John Hancock - Mentioned for Emily Roland.
  • Manulife - Mentioned for Emily Roland.

Tools & Software

  • Bloomberg Business App - Mentioned for listening to podcasts and watching live streams.

Websites & Online Resources

  • omnystudio.com/listener - Mentioned for privacy information.
  • youtube.com - Mentioned for watching live streams.
  • bloomberg.com - Mentioned for listening live.

Other Resources

  • CPI (Consumer Price Index) report - Discussed in relation to inflation data and its implications.
  • AI (Artificial Intelligence) - Discussed as a driver for AI and macro tailwinds, and its monetization.
  • Nuclear Fusion - Discussed in relation to TAE Technologies and its potential.
  • Deferred Resignation Program - Mentioned in relation to its impact on headline jobs numbers.
  • Money Market Funds - Discussed in relation to yields and investor behavior.
  • Quality Stocks - Discussed as having been left behind in a momentum-driven market.
  • Momentum Investing - Discussed as a driver of the market.
  • Technical Investing - Discussed as a driver of the market.
  • AI Story - Discussed in relation to potential market bubbles.
  • One Big Beautiful Bill - Mentioned as a source of provisions supporting corporate America.
  • Disinflationary Tendency - Discussed in relation to economic outlook.
  • Dividend Growth - Discussed as an alternative to yield.
  • Income - Mentioned as a focus for the next year over capital appreciation.
  • Capital Appreciation - Mentioned as a focus for the next year.
  • Revocable Trust - Discussed in relation to the Ellison family trust.
  • Personal Guarantee - Mentioned in relation to Larry Ellison's commitment to a bid.
  • Traditional TV Product - Discussed in relation to its valuation.
  • Cable Network Businesses - Discussed in relation to their valuation.
  • Pets - Discussed in relation to birth rates and people becoming parents.
  • Nuclear Power - Discussed as a necessary component for AI rollout and development.
  • Clean Energy - Mentioned in relation to fusion.
  • Monetization of AI - Discussed as the number one talking point for 2026.
  • Use Cases - Discussed in relation to AI monetization.
  • Enterprise AI - Discussed in relation to Microsoft's role.
  • Consumer AI - Discussed in relation to AI monetization.
  • Azure - Mentioned in relation to Microsoft earnings and AI.

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