The Fed, oil prices and AI: Can these create a recession?

Name: The Fed, oil prices and AI: Can these create a recession?
Uploaded: 2026-10-26T09:00:46+00:00
Duration: 23 min 4 s
Channel: HousingWire

00:10Welcome, everyone. I'm joined by my podcast partner, lead analyst Logan Motoshami to talk

00:16about the Fed, oil prices, and AI and whether combined they can create a recession. Before

00:22we dive in, here are the top five trending stories at housingwire.com. The first is Trump

00:27signs executive order targeting mortgage insurance, manufactured housing, and more,

00:32followed by treasury blueprints carve-outs from Rhodes Wall Street BTR ban. Then we have the

00:3810-year yield is under 5%. Are sub-7% mortgage rates next? And UWM plans MSR sale of up

00:45to $80

00:45billion in Q4 to cut leverage. Finally, we have Pennsylvania lawsuit targets $650 broker fee

00:52at Keller Williams Franchise. Okay, we are ready to dive in. And I just have to say, Logan,

00:59what did I call you in our story about the Signal Award? The de facto co-host. There you go.

01:05Yes. And now we have to brand everything as co-hosts. So we will be in another category from

01:13now on, which will be fine by me. But boy, Sarah, we talked about October being crazy. And I'm sitting

01:23here. It's Friday morning. The 10-year yield is at 4.999%. Brent crude oil is at yearly highs.

01:36More AI talk of a slowdown. But manufacturing data and service data, we're still very positive

01:43today. But one of the things that somebody asked me about, you know, you and I have talked about how

01:50China is really the big player in oil. And they have facilitated in keeping oil prices low when it

01:57was going down. And then the MOU deal broke off. But one of the things about yearly highs in Brent

02:03crude

02:04oil prices is, is Trump's, of course, is frustrated. He's talking about doing an attack after the

02:09midterms. When we talked about this conflict, when this conflict happened, oil was what, under $60,

02:16I think. Now it's Brent crude, at least is 116 and WTI is 102. I mean, does he roll the

02:23dice and risk it?

02:24But, you know, people say, but what's going on here? We're shipping more oil. I said, yeah, but look at

02:31the China imports. So I had to show the China import charts. And I said, they're the big player guys.

02:37So

02:37if they're importing, they're buying, guess what? Supply and demand economics come here, right? It

02:43isn't like all of a sudden, you know, China wasn't importing as they're importing more than they used

02:50to. So it has to kind of work the equilibrium together. So here we are. Oil is up here.

02:56The Fed is talking about multiple rate hikes. AI is slowing down. Well, you got three variables. Is

03:05that enough to tip the economy to be really slower and create a recession where the 10-year yield goes

03:14down? We go back into the labor over inflation argument and the bond market does what kind of

03:20it did in 2025. It consistently went lower, even though the growth rate of inflation was above

03:26target and we had trillions of debt and supply. So I think this will be a good time to talk

03:32about

03:32this because the Fed is going to meet this week and they look like they're going to punt the rate

03:38hike until December. Well, let's take those one at a time because those are three key variables.

03:43Like on the oil prices, love that you called out, you know, why this is problematic now when we do

03:49have more oil flowing. I think this is the toughest one because, you know, I believe probably why the

03:56president wants to do something after the midterms is like he wants this to be done, right? Well,

04:01how is it going to get done? I mean, he doesn't have a lot of great options. If he just

04:05does nothing,

04:06that doesn't get anything done. So, you know, having more action could get something done,

04:11but it could also just, I mean, could not work, right? I mean, it doesn't seem like there's a

04:15great plan here. So oil prices to me seem the hardest part here.

04:21You, if you roll the dice in the Middle East, especially in the straight-up room, this can

04:27happen. You know, our, our always concern, big concern is Trump's so used to bully ball

04:34and he always believes bully balls work. Well, this is different. This is, you're, you're killing

04:39their leaders. You're, you're attacking their infrastructure. You're destroying their military

04:44and it, and it hasn't worked to where you want it. So both sides are going to have to make

04:50a deal

04:50that they probably don't want to make, but is it going to be more conducive to make a deal after

04:55the midterms now, or there's Trump basically there's enough Democrats win enough to end this on

05:01their own. In any case, China's not our friend. Uh, Iran's not our friend and Russia's not our friend

05:07and they're all working together to make it as painful as possible now, right? For the history

05:14books that going into the Middle East like this has consequences politically. Cause what you and I

05:20have talked about for many, many years, we have two year political cycles here. They don't

05:26advantage, disadvantage, right? They can, they can weather storms politically where in the U S you

05:32couldn't. And then on top of that, you know, the tariff, the trade war, all these things are not

05:36very popular. So, um, we'll see what happens after the midterms, uh, because Iran's economy is getting

05:45hit drastically. Uh, these aren't the sanctions of the past. So, uh, do cooler heads prevail? But to me,

05:53what's going on here is Trump's trying to play the psychological warfare. Hey guys, take a deal or else

05:59we're going to, and Iran's going to go, fine, shoot at us. We've got ballistic missile. We've

06:04got all these things. We we'll just, we'll make things worse. And there is a point to where if

06:10Congress just basically tries to just end this by themselves. So that's the oil story right now.

06:16Cause I know a lot of people were confused that oil prices are elevated, but we're flowing more,

06:20but you know, look at nobody shows the China imports. God, I'm such a nerd. What such a dork.

06:26I'm showing China imports. Oh, look guys. It's not shocking that the imports are coming up here.

06:32So is, is there a particular, like, is there a threshold for the price of oil that you feel like

06:37that that's the, the breaking point? Like, is it above a hundred? Is it 85? Is it like,

06:43at what point do we know that the price of oil for a sustained amount of time will, will,

06:48you know, drive things into a deflationary?

06:53The thing is that people have to consume energy, right? And it's not like you, you,

06:59you have a choice. So as a percentage of disposable income, we're consuming less on oil,

07:06adjusting to inflation. It's not as high as it was like in the late seventies. I think in the late

07:11seventies, oil today would have to be like $426. So, so we can handle this. This is, this is not

07:18a

07:18oil prices itself. Cannot create a recession unless it like really takes off to let's say

07:26275, 400, where you can't fly anymore. Uh, truckers can't do, you know, the, the obligations

07:33needed to perform transportation of trains and playing all these things that can be a problem,

07:41but so far oil prices aren't in that, in that manner. And at that point, even Trump would basically,

07:47you know, call it quits. Um, so we're not, we're not at levels. And I, and I always,

07:54I always like to show people 2011 to 2014 oil prices were elevated for years, many years in

08:00the U S economy with a weaker labor market, uh, debt, deleveraging foreclosures, bank, we're still

08:06expanding. Um, but I think for the federal reserve is, you know, federal reserve has written papers that

08:14you don't chase a supply shock or you don't chase a trade war because it just makes the problem worse.

08:20Right. You know, Beth hammock runs around saying, well, I want to help poor people. And, and, you

08:26know, uh, uh, they're choosing between rent or eating. I hate that Mickey Mouse stuff. I want

08:31politicians to use that, you know, and they go, I'm going to do it by raising rates, by costing them

08:36more interest on there, you know, and I was just like, you know, we, we have to evolve from that

08:42thinking. If you want to say that, listen, I just want the growth rate of inflation to fall and not

08:46get, but don't say that all these Americans are on the verge of choosing between food and stuff.

08:52And I I'm very suspect of Beth hammock for the rest of her career by some of her LinkedIn posts.

08:58But

08:59in, in this case, we can handle oil price, oil prices itself. Now it has been historic in time,

09:05in previous cycles where oil prices are elevated and we go into a recession, but in 2008, the credit

09:12markets were breaking foreclosures and bankruptcies were rising in 2005, six, seven, and eight. And,

09:18you know, then, you know, uh, uh, uh, we saw the residential construction workers start to lose their

09:23jobs and all that, the capital markets broke. So that's a recession. We saw that in, in, in,

09:27in 1991, but the credit markets were breaking as well, uh, back then. So oil itself is still not

09:34at a level to, for it by itself to create a recession. It is a tax. It is a drain

09:41on people,

09:42especially a lower income, but, uh, in itself, the aggregate middle class of the U S can handle it

09:49right here. So, you know, even if it went up to one 25, one 50, I mean, I think there

09:53would be an

09:54outcry from, from the public, but as far as economics that, that it could go much higher

09:59and still not have that kind of, not a recession, but to your point, politically, I just think you

10:05have, you have a lot of red States that are feeling the pinch of diesel. And, you know, I mean,

10:11we're,

10:11we've become basically a farmer bailout country. We're just consistently bailing out farmers all the

10:17time now, you know, so there's consequences to actions, but those Republicans in those States

10:23are, you know, Trump's in his last two years, right? So the, the, the evolution of moving past

10:30Trump is going to be starting after the midterms on how the Republicans and Democrats are going to

10:36operate. But sometimes Sarah, you need the person to put both hands on the stove and have it be really,

10:45really hot until you realize this might not be the best idea. Trade wars, Middle East conflict,

10:54all these crazy headlines, investing in companies by the government, all these things that are not

11:00normal with us in a certain period of times. Sometimes the stove has to burn your hand.

11:05And then you realize that all of a sudden everyone's, Hey, this isn't, this isn't good.

11:10I need bailouts all the time. I need, you know, so, so to your point, there is a

11:15probably an inflection point, even for Republicans in the house and Senate. And of course, what we'll

11:20see what happens after the midterms, how much the Democrats actually pick up, but I politics is

11:28politics, but this is the economics of choices from politicians. So we, we, we chose to go into

11:34the middle East. We chose the trade war in a time where inflation was on everyone's mind. So both those

11:40two things has consequences if they prolong themselves.

11:45All right. Well, let's talk about AI, which is something we've been talking about all year,

11:49because the AI boom was one of the things that's, you know, driving the inflationary pressures,

11:55the investment in AI, the growth of AI. And we've seen a little bit, I think in your,

12:00in your story yesterday. Sorry, let me say that over. In your recent story about this topic,

12:07you know, you talked about the first crack in that AI story we saw recently. So, so tell us how

12:14you're looking at the AI right now and how this could lead in combination with these other things,

12:19how that could lead to a recession. Well, every economic cycle has an overinvestment.

12:26And when that overinvestment fades out, then you have too much supply of that sector. And then you

12:33have to lay off people. Now, the irony, Sarah, is when January and February is here, it was the

12:40reverse. It was AI was deflationary and unemployment rates were going to sky because every question I

12:46was, or every city that I went to last year and going into the first few months of this year

12:52was

12:53who, who are going to buy all these homes? AI is going to take all the jobs away. And you

12:57know me,

12:58this is, this has been my thing for a very long time. The history of US economics going back to

13:041870, every technology is supposed to take all the jobs, right? And we're sitting here, I think New

13:09York carriages are going to go away, right? And back in the 1900s, everybody was worried that all the

13:17cars were going to destroy all these jobs or whatever these. So here we are with over 162 million people

13:23employed. Remember non-farm payroll is only about 80% of the, of the jobs work. Job openings are over

13:297 million. Death, Sarah, death, death, death, death is such an important thing in economics.

13:37And I tell people for how many years, I'm more worried about not having enough labor,

13:43not, you know, all of a sudden unemployment rates going to 50 to 25%. And here we are,

13:48the unemployment rate is, is low still because the labor force growth has slowed down. So the need

13:54for manual labor is still here. On the AI crack thing, I think I put a stock chart of core

14:01weave

14:02in there. And I said, okay, guys, look at this. This is creating the drama. For now, the AI story

14:08is

14:08intact. The question is, is it slowing down? If it's slowing down, does the 10 year yield need to be

14:13above 5%? Well, we're at 4.99 right now, but Fed policy has made AI, Hey, listen, this is

14:21very

14:21inflationary. This is if the data centers weren't being built, guess what? What are you doing with

14:29those construction workers? Cause they ain't built, they're not building apartments. Single family

14:33construction is, is slow. They're not building a commercial buildings anymore. There's enough

14:39warehouses out there in America right now. So the AI, it was just all, I just wanted to give the

14:45theme like the predator movie. If it bleeds, you can kill it. All it is, is that you saw a

14:51little

14:51pint of blood and, you know, and if the 10 year yield is above 5% and people are putting

14:57multiple

14:57rate hikes in, you can't see that pint of blood. This thing has to run hot, right? Everything has to

15:02run hot, hot, hot to keep the bond yields up here. So, so one of the six recession red flags

15:10is you find

15:12the overinvestment in every cycle and you focus on that cycle because when demand slows down,

15:18there's way too much capacity. So obviously AI is it, AI is the overinvestment in the cycle. So as long

15:26as that keeps going, whatever money is needed and whatever, uh, uh, manual labor is needed,

15:32it keeps going. But at some point it all slows down eventually. And then there's too much supply

15:38of workers or, uh, uh, supply of data centers, whatever, whatever the final ending is, this is

15:45why people are mindful of bond traders. It's, you just saw that little pint of blood and you gotta be,

15:50uh, careful of that and financing and debt issuance. And then, you know, there's so much,

15:57of this angst, you know, moratoriums are coming for AI and all this stuff. So now is the time you

16:03just kind of take a step back and think, okay, do we really want to push the 10 year yield

16:08higher on

16:09this? Let's get some clarity on that. And that's the mindful thing at some point in the future,

16:15it can create, uh, uh, uh, uh, hypothetically speaking, let's say the fed raises rates to the

16:21point where residential construction lose their jobs. Oh my God, wait a second. We don't need any more

16:26data centers. Are all these workers here, pink slip. There you go. So now you get a twofold,

16:32right? You get the data centers and you get residential construction and then, oh, you have

16:36construction labor and residential both falling together. That's never a good sign for any economic

16:43cycles, but here construction workers are at an all time high, more than the housing, uh, bubble peak.

16:49Uh, but the residential construction move is slowly moving lower. Nothing, nothing drastic in the past.

16:56You see this waterfall dive in that data line recession next so far. You haven't seen that. In fact,

17:02the last month picked up. So, so that's kind of the AI mindset I have, you know, so we have

17:07energy

17:07prices and energy prices are limited, less consumption attacks AI it's bleeding, but so far we haven't seen

17:14any layoffs and data centers or anything like that. We were mindful of it. And then, you know,

17:19what's the fed going to do at that point? That's the third factor, the, the fed in this. And like

17:25you said, they're meeting this week when this, um, podcast comes out, it'll be this week. So as

17:30they're looking at this, have they said anything recently about the oil, about the AI, about, you

17:35know, at, oh, they're in their quiet period, right? They're in their quiet period, but obviously the

17:41federal reserve has made this conflict front and center as one of their key things. We don't like

17:46oil prices here. We don't like diesel prices. Well, the counter to that is you want less consumption.

17:52You want a slower economy. Guess what could do this? Higher oil prices can consume less. So

17:58there is a, there is an inflection point that there's a federal reserve at some point, look at

18:03these energy prices as disinflationary to the economy in the terms of, you know, less consumption

18:10being done so far. It's not, not there. Manufacturing data, ISM data are still very

18:15positive. Uh, but it is something maybe in the future, if the AI was really slowing down and you

18:22saw retail sales slow down, then you have something to work with. So when we think about the aggregate

18:27total oil elevated AI over investment, when's that going to, and then the federal reserve hiking

18:33into this, we've seen this in previous cycles that they, the fed does this when these two are

18:39problematic. And then you see the slowdown in the economy. So it's not there yet, but it is something

18:45to think about now all because one company showed that it could bleed. And now we're going into the

18:53weekend, Brent Cruz at 116, 117 dollars. We have a election coming up soon with people very against

19:00the trade war, very against AI and big time against energy prices. There's a lot going on here. And this

19:06was the month of October. So the bond market shows not to break that key level and take bond yields

19:13a

19:14little bit lower. And we'll see how that goes up. This makes, I think the federal reserves job a little

19:19bit more complicated because they're all here. They're all negative in a sense now, right? Oil prices

19:26being up here, negative diesel prices are negative. Is AI really slowing down? That can't be good for

19:32their premise. But also, is that what they want, right? If they're talking about slowing the economy

19:37down, what did they want that? So it's a lot of back and forth on this on their side, but

19:43it'll be a, it'll

19:44be a very interesting Q&A going out there. But as of now, consumption and investment are still holding up.

19:51Nominal growth is still holding up. Deficit spending, which is still a big variable in this cycle.

19:56Our deficits are basically what we see during a recession to stimulate the economy, right? The

20:03surplus of money into the economy in a recession to help it grow. We're doing it in an expansion

20:09when the Fed is talking about raising rates. So that goes into the equation. I just don't think a lot

20:15of

20:15people like ever think about that, you know, because nobody thinks, oh, the deficit spending is really

20:21keeping the economy going, you know, but here we are, you know, on Fed week, the last week of October,

20:29we say, if we could just get through this month, you know, and then we could see what happens after

20:34the midterms. But very interesting, very, I'm never going to forget this month ever in my life,

20:39all the things that we've, and all the articles we've written and all the podcasts about trying

20:43to manage it, what the hell's going on here? Because it wasn't that long ago, you know, hey,

20:49if this breaks, man, you've eight, 9% mortgage rates, everything, all of a sudden,

20:53whew, just a little pint of blood. It did not break that, thank goodness. And you identified

21:00that level. It's going to be really interesting. And what do we always say, especially on a Friday,

21:04anything could happen between now when we're recording this and when it goes live. So we'll

21:09be keeping an eye. And, you know, listeners, you know, we, the newsroom's on top of stuff. Logan

21:15works all weekend long. If something happens, look for him to be updating the insights on our

21:22housing wire intelligence and also writing a story about it. So we have a lot of ways to

21:27communicate if things start happening, but it's going to be crazy. It's going to be crazy. And

21:32it's good. What a time for FedWeek, the last week of October, and then Halloween's coming. What are you

21:36going to be for Halloween? I haven't decided yet. What are you going to be for Halloween? You know,

21:41I love to dress up. So I'm always going to be something. Oh man, what do I, well, I mean,

21:46if the dollar would have gone up to like one 10, I would have been the U S dollar, uh,

21:51uh, for

21:51Halloween. Um, I might wear like a blonde wig and be, uh, uh, Theranos cause her movie's coming out.

21:59Oh my gosh. And I've got a blonde. I just need to get big blue. That's what I'm going to

22:04get big

22:05blue eyes. Oh, I'll bring my Halloween costume. I I've got to find a blonde wig and big blue eyes

22:11and then be like Theranos and go oil prices are going to come down very soon. Yes. I wouldn't

22:19lie to you. No. Why would I lie to you? The war is going to end soon. That's so perfect.

22:25I'm going

22:25to go see that movie actually this weekend. I'm really, uh, it's gotten incredible reviews. Okay.

22:30Well, with that in mind, I definitely have to rethink my, you know, I'm usually like a good

22:35witch kind of person because I'm handing out candy to little kids. So we'll see. Maybe we'll,

22:39maybe we can get a dual costume here for, for next Friday. All right. Well, we'll do that. Uh,

22:44we'll do that the, uh, next Friday. Uh, definitely. Uh, we're up for it. Okay, Logan, thank you so

22:50much. Thanks for, uh, keeping us up to date as always. Pleasure.

The Fed, oil prices and AI: Can these create a recession?

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