Oil is at $105 a barrel, the 10-year Treasury note yields 5% and the 30-year 5.3%. The S&P 500 is up double digits this year and small caps are up more.
Almost nobody would have forecast that combination, which is Alicia Levine's point. The economy has gone back to a pre-financial-crisis shape — more industrial, less financialized, with higher rates and higher inflation — and the market has spent the year repricing to it.
"And by the way, an AI bot will not take the place of a strategist because of that."
Levine is CIO of BNY Wealth, where she sets asset allocation across the bank's client base, and she raised her S&P 500 earnings estimate for next year the same week without touching her price target.
The full segment is covered here so you can skip it.
Here are the 8 calls that matter.
👤 Guest: Alicia Levine, CIO of BNY Wealth, who chairs the firm's investment strategy committee and sets asset allocation across its client base
🎙️ Hosts: Tom Keene and Paul Sweeney, who anchor Bloomberg Surveillance
🧩 Other segments: Steven Major, Global Macro Advisor at Tradition; Jay Goldberg of Seaport Research Partners; and David Rosenberg of Rosenberg Research
📰 Published: 16 September 2026 on the Bloomberg Surveillance feed
🟣 Apple Podcasts | 🔗 Episode page | ⏱️ length not available
Key Takeaways
The burden of proof has flipped: with tariffs, a six-month oil shock, two wars and an AI supply shock, the hawks have to explain why core inflation is only 2.4%
She raised next year's S&P 500 earnings estimate to about $430 from $395 and left the price target alone, because the multiple is falling
The index is at 19 times and the tech sector at 21 times forward, against 46 times in 1999
A rate increase does not end the bull market, but it does hit multiples and anything that needs funding
Higher rates are not an anomaly, they are a return to the pre-2008 economy
She dates the break to COVID, not to the financial crisis itself
She raised her allocation to real assets two months ago — infrastructure, commodities and real estate
Her reasoning is a 3% inflation world in which you cannot own only financial claims
Artificial intelligence is subtracting from headline GDP, because the chips are imported
Her advice on the Magnificent Seven is to hold rather than rotate, because the spending continues whatever the safety debate concludes
1. Back to Pre-GFC
Keene opened with a piece of his own arithmetic: taking logarithms of the yield series back to 1986, the average yield of the great moderation sits roughly where the market is now. He asked whether today's yields are normal.
Levine said they are, and that the shift is structural: "Look, we're going back to a pre-GFC world." She listed the dimensions — inflation, rates, a more industrial economy and less financialization of the economy.
The break she dates is the pandemic, not 2008. "COVID really was the break in what we had before. And we're going back to what we all grew up with."
Keene's framing of why he used logarithms was to get percentage movement rather than what he called media blather about a 5% level.
2. The Tape Nobody Called
Her case that the market has already absorbed this is the price action itself, and she put it as a question no forecaster would have answered correctly.
"If I told you oils at one hundred and five dollars a barrel, the 10 years at five percent, the 30s at five point three." Add to that an S&P 500 up double digits and small caps up double digits and outpacing it.
Her answer to her own question was no — nobody would have believed the combination.
Which is where the strategist's job survives: "And by the way, an AI bot will not take the place of a strategist because of that."
She set the level against the growth rate, describing 5% yields in a world growing six and a half percent in nominal terms, where the market has increasingly priced in rates.
3. Hikes Don't End It
Asked whether a rate increase — possibly the first of two or three — ends the bull market, Levine said no, and then refused the comfortable version of no.
"So I don't think it ends the bull market, but we cannot pretend that hikes are good for multiples or good for marginal areas of the market that require funding."
The damage shows up as rotation rather than as a drawdown. The struggles in long-duration assets, she said, are going to be real.
"This is more of a dispersed market." The index level has held within 3% of its high because sectors take turns working while others are negative.
Her conclusion for an investor is unusually blunt for a stock-picker's market: "You're best off, I think, just buying the index, because some will work very well in this environment."
4. $430, Same Price Target
Asked whether next year's earnings can stay decent, Levine described an exercise her team had run that week.
They raised the mid-range S&P 500 earnings estimate for next year to about $430, from $395.
The price target did not move, because the multiple is going the other way.
"We're at 19 times now." And on the sector that carries the index: "The tech sector is at 21 times forward earnings."
The comparison she reaches for is the dot-com peak. "In 1999, that was 46 times."
"So we're not really expensive by any stretch of the imagination."
Her base case through the election: "So we're going to have a muddle through into midterms."
5. Growth Moves, Not Prices
Keene asked, in the language of partial derivatives, which component of nominal GDP — inflation or real growth — moves most when the Fed raises rates. Levine picked growth, and then attacked the premise of the hiking cycle.
"So, look, I think it's probably a little bit on the growth side because ultimately the inflation is being driven by supply shocks."
She described the decision to hike as reflexive rather than analytical. "And the Fed needs to raise rate because the market's telling the Fed it needs to raise rates." The argument that not hiking costs credibility is, in her words, "Like, it's a circular argument, but there it is."
The claim she wants tested is the hawks', not the doves'. "I think the issue is, and for me, I think that the hawks must explain why inflation is not higher." The shocks she counts are tariffs, six months of an oil shock, two wars and a supply shock in artificial intelligence.
"And why is core inflation at 2.4%?"
So she accepts the hike and doubts the mechanism. She does not think the hiking cycle will affect the inflation people feel — which she was careful to say is definitely real — but it will affect growth at the margin.
The personal aside that landed in the middle of it was tuition. Keene added tuition bills to her list of shocks, Levine added her own, and said the housing market in Ithaca has to be seen to be believed.
6. Real Assets, Not Bonds
Asked whether liking materials amounts to a commodities call, Levine gave a broader allocation answer.
The build-out of artificial intelligence is part of it, but so is the commodity side. "We just raised our allocation to real assets about two months ago."
What that means in practice: "Infrastructure, commodities, real estate."
The reason is the inflation regime, not a cyclical view. "We are back to the future. We are in a nominal world." She puts it at a 3% inflation world.
"We're in a world where central banks may be hiking, but we're not getting back to 2% anytime soon. And we are in a reshoring world." She declined to call it deglobalization and called it a block world instead — the Western Hemisphere, China, and Europe with perhaps Canada.
The industrial evidence she cites is the breadth of the manufacturing cycle: "You've got 90% of regions in expansion." She called it a global investing cycle.
On the other side of the book she is short duration and has been rewarded anyway. "We are underweight fixed income." And yet, she said, "High yield's done well. Emerging market debt has done well." — evidence, in her reading, of global growth.
7. AI's Share of GDP
Asked what the artificial-intelligence trade looks like now that guardrails are being debated, Levine started with the national accounts rather than the stocks.
"Well, look, it definitely drives GDP because it's about one-third to one-half of U.S. GDP this year because the imports are so high for AI."
The mechanical point is that imports subtract. "The imports are taking away from top-line GDP because you have to subtract it. Think of the chips we're importing from Korea and Taiwan."
8. Keep the Mag Seven
Keene raised Thomas Friedman's column in the New York Times, and Parmi Olson's writing alongside it, and asked how a holder of the largest technology stocks should react to the safety argument.
"Look, I think two things are true at the same time." A pause may be warranted, and the United States is in a foot race with China.
She framed the race as a security question rather than a commercial one, saying it is about national defense and national security and that it is naive and worse to think otherwise.
On the models themselves she was admiring, saying they are smart and that watching how they learn is quite extraordinary.
The instruction is to sit still: "In the end, you keep the holdings."
"I think it's too volatile, but what we know is that the investment will continue. It's still continuing, and it's an industrialization."
Bonus Insights
Keene asked whether she is cashing out Nvidia to buy a three-bedroom house in Ithaca, and Levine leaned into it. She said she wants to be a landlord there: "I want to buy those dilapidated houses and charge God knows what." Asked whether she is really going to do it, she said she has thought about it, and tied it back to the thesis — real assets, because it is a nominal world.
Keene asked whether he had seen her at the US Open; she said no, she was in Maine. The desk suggested she was saving for the house.
Keene opened the segment by saying they were going to logarithms on a Wednesday, and had to explain to the audience that logarithms are what he meant.
Levine's bottom line is that the market has already repriced to a pre-crisis economy, so the hike is not the risk — the risk is paying a 1999 multiple, which nobody is, and the position that follows is the index plus real assets rather than long-duration bonds.
Products, Companies & Tools Mentioned
BNY (Levine's firm, whose asset allocation added real assets two months ago and remains underweight fixed income)
Nvidia (Keene's stand-in for the Magnificent Seven position she says to keep)
The New York Times (Thomas Friedman's column on AI, which Keene put to her)
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