Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Thanks so much for
Speaker 1: being with us, Rob.
Speaker 2: First of all, I want to talk about your reaction
Speaker 2: to Kevin worsh as the next chairman of the FED.
Speaker 2: You know him, You've brought him to Dallas in the past.
Speaker 2: What do you think about this.
Speaker 3: I think he'll be an excellent FED chair. He's got
Speaker 3: a lot on his plate, especially in the next number
Speaker 3: of weeks. He's got to get prepared for that first
Speaker 3: meeting and the press conference and the dot plot explanation.
Speaker 3: But I think he'll do a very good job. And
Speaker 3: he has a number of challenges in front of him,
Speaker 3: but I think he'll be an excellent FED cher.
Speaker 2: You just pointed to that next meeting. What do you
Speaker 2: expect in terms of interest rates, especially when you're looking
Speaker 2: at inflation in the war.
Speaker 4: Yes.
Speaker 3: So the reasons I say it's challenging is if you
Speaker 3: roll back the clock, you know, eight weeks ago, I
Speaker 3: think the view was the next FED move would be
Speaker 3: a cut, just a question of how late you was
Speaker 3: it going to be because of oil prices being elevated
Speaker 3: and inflation readings being stickier. Now the view is and
Speaker 3: probably the conditions would warrant. The next FED move may
Speaker 3: actually be a raise, and they may do nothing this year.
Speaker 3: And if they were going to do something, it would
Speaker 3: be more negative from a rate increase point of view,
Speaker 3: because they have to deal with inflation. So he's going
Speaker 3: to have to work through that and the meeting itself.
Speaker 3: He's got to get to know people after day around
Speaker 3: the table, he has to understand their views.
Speaker 4: This is before the mid June meeting.
Speaker 3: He's got to clean up the statement so it has
Speaker 3: more of a neutral bias rather than remember the three
Speaker 3: descents in the last meeting about the downward a bias.
Speaker 4: He has to clean that up.
Speaker 3: And there's a dot plot that comes out after this meeting,
Speaker 3: and the dot plot's going to show expectations for.
Speaker 4: The rate path are firmer, not lower.
Speaker 3: And so he's going to be responsible for explaining the
Speaker 3: dot plot in the press conference. So that's a lot
Speaker 3: to prepare for in the next three or four weeks.
Speaker 2: As you very well know, you saw how President Trump
Speaker 2: was very public about Jerown Powell and his decisions.
Speaker 1: President Trump saying.
Speaker 2: Today and this really stuck out to me in the
Speaker 2: press conference, he's telling Kevin Warsh, I want you to
Speaker 2: be independent.
Speaker 1: I want you to do your own thing. Is that
Speaker 1: even possible?
Speaker 3: Yeah, I think it's not only possible, I think it's essential.
Speaker 3: And I think Donald Trump, in his comments obviously is
Speaker 3: indicating that, and Kevin Warsh knows that, meaning he has
Speaker 3: to be seen not only in the room at the
Speaker 3: FOMC as is independent, but I think to the public
Speaker 3: for the Fed's moves to have credibility, I think he'll
Speaker 3: have to position himself as an independent arbiter who's trying
Speaker 3: to make the very best decisions to make sure we
Speaker 3: control inflation and we have full employment and so whatever
Speaker 3: public statements might have been made in leading up to
Speaker 3: confirmation and up to now, I think he can wipe
Speaker 3: the slate clean on those and I think Kevin worsh will,
Speaker 3: and my advice to him would be he needs to
Speaker 3: not worry about any political constituencies at all, and I
Speaker 3: don't think he will. He has to worry about doing
Speaker 3: the job.
Speaker 2: Former FED share Jerome Powell has decided to stay on
Speaker 2: as governor. You talked about the voices in the room.
Speaker 1: How does the new FED chair handle that?
Speaker 4: Well? I would guess j.
Speaker 3: Powell's approach will be to be as quiet as humanly possible,
Speaker 3: given he's sitting around the table and he'll get a
Speaker 3: turn to speak, but I think he wants to fade
Speaker 3: into the background as much as he can allow the
Speaker 3: new FED chair to take over. He's staying for a
Speaker 3: very narrow reason, I believe, which is he's worried about
Speaker 3: the legal overhang, and I would hope that Japalell stay there,
Speaker 3: will the time frame will be minimized as little as possible,
Speaker 3: but I think he won't. He'll try not to do
Speaker 3: anything that might impede the ability of Kevin worsh to
Speaker 3: step up and take control and do his job.
Speaker 1: I'm curious.
Speaker 2: I want to shift to Goldman Sachs before we let
Speaker 2: you go. I want to know what your clients are
Speaker 2: telling you right now about AI.
Speaker 3: So we obviously know that inflation's been stickier, the ray
Speaker 3: curve is moving up. It's having some challenging effects on
Speaker 3: the economy low modern income consumers. But to your point,
Speaker 3: against all that, you've got a structural, historic, structural trend
Speaker 3: of not only AI infrastructure to build a compute, that's
Speaker 3: the eight hundred billion being spent this year, but AI
Speaker 3: adoption and what we're seeing is every business is having
Speaker 3: to work on use cases about how they can build
Speaker 3: in AI adoption to improve their business. Here's how it's
Speaker 3: playing out in the US and the economic growth. Economic
Speaker 3: growth is solid but kind of sluggish. Corporate earnings grow
Speaker 3: on the other hand, is being revised upward, and I
Speaker 3: think we're going to see potentially a multi year trend
Speaker 3: where SMP earnings are improving at double digit rates, even
Speaker 3: though GDP growth is a little bit sluggish. It's going
Speaker 3: to be more concentrated in smaller names, but many businesses
Speaker 3: are going to use AI to improve their margins and
Speaker 3: their business. And that's what we're hearing from clients.
Speaker 2: Before I let you go, we're sitting here in Texas.
Speaker 2: You're going to have a large, large new office in Dallas,
Speaker 2: well on your way to more than five thousand employees here.
Speaker 2: What are you hearing from those that are deciding, Hey,
Speaker 2: we're going to move to Texas.
Speaker 3: So at our firm, we've got already forty five hundred
Speaker 3: plus people here on our way to as you said,
Speaker 3: over five thousand.
Speaker 4: That's part of a global firm.
Speaker 3: That has forty five thousand plus or minus people globally.
Speaker 3: This will be a major presence, and one of the
Speaker 3: things we like about Texas is to growing state, magnet
Speaker 3: for people and firms here, pro business culture, access to talent,
Speaker 3: and one of the things that we're also seeing there's
Speaker 3: a very collaborative atmosphere between government, business, academia, nonprofits to
Speaker 3: where we have shared ownership, and I think that kind
Speaker 3: of mindset has been a magnet.
Speaker 4: For people and firms to move here.
Speaker 3: It's a very welcoming environment and pro business in a
Speaker 3: constructive way, and I think that's some of the various
Speaker 3: things that we like at Gold and Sacks and many
Speaker 3: of our clients like, which is why.
Speaker 4: They're coming here.
Speaker 1: Rob Kaplan, thanks so much for being with us.