How everything changed for the oil, AI and bond trades in October

If there was one safe bet over the course of 2026, it was that treasury yields would rise alongside a move up in oil futures contracts. Over the past month, that ended, and according to Jeffrey Rosenberg, senior portfolio manager of the Systematic Alternatives ETF (IALT) at BlackRock, the world’s largest asset manager, the breakdown in that trade has big implications for the market.

“Oil and treasury yields had this amazing correlation and in October it just stopped,” Rosenberg said on the most recent CNBC “ETF Edge.”

The relationship between oil and bond yields was featured in Federal Reserve Chair Kevin Warsh’s FOMC press conference on Wednesday, with Warsh noting how oil futures have continued to rise, a factor the central bank must consider in its fight against inflation. But Rosenberg said what Warsh didn’t talk about was “the most important takeaway.”

“Treasuries and oil had an 80% correlation this year,” Rosenberg said, which is “outsize” relative to normal correlations. “We’ve basically been trading off oil for good reason.” “

What happened? Rosenberg says you can sum it up by looking to the deflated AI trade. As the market moved away from that oil-treasuries trading correlation in October, “It told us something important,” he said. “In the market’s mind, the geopolitical risk is secondary to AI risk,” he said.

Over the past month — which became most painfully clear in Friday’s Nasdaq market wipeout and, earlier the week, Google’s biggest single-day decline in its history, wiping out half a trillion dollars in value — the AI trade experienced a retracement. Bond yields went lower, Rosenberg says, because the market is equating weakness in the AI trade as a broader weakness in the U.S. economy. And he said, last week’s GDP report backed up that thinking. “AI is everything, everywhere, all the time,” he said. Both the growth for the economy on the investment side and the wealth effect on the consumption side are all AI, he said.

“Q3 GDP was a blowout [number] and all AI-related,” Rosenberg said on the “ETF Edge” podcast extended conversation. He pointed to equipment investment increases and consumption well above expectations and both fueled by the AI wealth effect, which with the latter is even more notable given that real incomes have been coming down in the U.S.

Business investment of 12.7% in Q3 was the biggest increase outside the pandemic since 2011, led by a 37% rise in information processing equipment. Industrial equipment investment rose nearly 25%, which while not a straight AI trade, does partially reflect spending on data centers.  

Warsh did not agree in his assessment of the economy at the FOMC press conference. “It is convenient to say that the strength of the economy is all about this new technology wave. In fact, if we look at the data, really including data from…