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You make your luck on foreign exchange. You have win thin with us today. You studied with Robert Mandel at Columbia University years ago.
Is wonderful. You do even better if on an historic.
Day like this, Abby Joseph Cohen decides to join US iconic at Goldman Sachs now teaching at win Thin's Columbia Business School as well. Abby, when you slid out of Cornell, this is just a few years ago, folks, the Dow was just under one thousand. The Dow is forty nine thousand and thirty seven right now. You were a pinata in two thousand and eight. I'm going to give you the worst She made the worst call at the worst time in two thousand and eight, and the S and
B five hundred is up eight point six percent. If you made the worst call in two thousand and eight, that's better than nominal GDP. If you make the worst call on the pandemic, Paul Sweeney, you're up one hundred and five percent of twelve percent plus per year. I mean, just the basic you know, basic, basic, tough. Is there an alternative to the stock market? I don't see it.
Well, let's back up a little bit, uh, Tom, and good morning to you Paul as well. What we have, of course, is an American economy that was never gone. The American economy has been dominant truly since the end of the Second World War. We have been very fortunate. We have been blessed, if you will, by decades of investment and education and science and other forms of research, and so we have a stock market that is reflecting that.
When I take a look at recent stock market performance, I see that investors are focused on basically corporate profits at this point, and companies have not been disappointing. Here's the question I think for investors, and that is, with valuations at current levels, is there any room to hide if there are disappointments? And that to me is an issue not just for traders, but also for long term investors.
So abby, how do you think the valuation? What's the valuation discussion we should be having about this market, because a lot of folks are citing high valuations, but it seems like the earnings are out there to support them. How do you think about it?
The earnings clearly appear to be out there, which is great. I'm very pleased about that. I don't see a recession coming in the US this year. Also great news and what we need to recognize, of course, and so many people who have been on Blueberg in recent weeks have talked about this is the ongoing rotation that we're seeing in the US stock market that is reflecting this challenging valuation environment in some sectors. And I think that's a
healthy discussion to have. We do see that some sectors that have been laggards have been moving ahead, and we also see that some markets outside the United States have also been performing better. One of the big question marks out there, of course, is the dollar. Right now, we have investors who are basically saying they're focusing on corporate profits,
they're focusing on cash flow. The intermediate and long term picture, however, to me, looks somewhat cloudier, particularly with this valuation overhang in some sectors.
I mean Paul Sweeney, Abby Joseph Cohen's iconic financial journalist Journal's paper was on Aristotle. If she's studied with Aristotle in her interi program at Colvin SEC years ago, I look, Abby, and I want you to talk to people about the historical moment we're in. I'm not going to borrow you. You know where we are gold fifty three hundred, We've got dollar. I got a president, tell me I want week dollar policy.
Let's be kind.
It's a neo Murcintils policy. Do you perceive the presidency of Donald Trump is one off for financial markets or is there a new reality here we have to adapt to.
Well, I'd like to correct you if I may. I didn't study with Aristotle. It was Sophocles.
Okay, it's good, don't drink the beverage.
But there you have it. I'll stay away from that as well. We have a situation right now where I think that investors and especially traders are really focused on the very short term what's the profit picture? Is the FED going to adjust short term interest rates and so on? And we have, nevertheless a broader policy mix which is
not necessarily all that favorable on a long term basis. So, for example, the trade policies which have been implemented, all of the things being equal, notice I use the Keterist parabus in there, but all of the things being equal, the trade policy we have pushes inflation higher, not lower. The fiscal policy we have right now will stimulate economic growth in twenty twenty six through the depreciation allowances, through the extra checks that middle income families will be receiving.
But all of the things being equal, that too pushes up inflation, as does the weaker dollar. And so when we have the President saying, as he did, he's okay with a weaker dollar, which is a rather unusual thing for the President of the United States to be saying, that basically tells us something about the intermediate to longer term view. Because keep in mind, the Fed, whatever decides to do today, the Fed controls only the Fed funds rate,
only the very short term rate. Only the rate that banks borrow at the rate of borrowing for everyone else in the economy is done further out along the yield curve, and that could be problematic because all of these other
pressures suggest that those interest rates have moved higher. Now, what's also fascinating to me is that the administration is talking about a number of steps that others would viewed as economic or market interference, for example, telling banks what credit card rates they should be.
Trying to go third rail? Are you teaching them?
And also the discussion in terms of controls on the mortgage markets. This is something that we've not seen in a very long time.
Joseph con As we continue with that, Joseph on Columbia Business. Can you see her with a piece of chalk in her hand talking about dropping credit card rates from twenty nine count to ten percent?
See what they call students? Pusrati would be Joseph Cohen Abby.
What will you be listening for?
Today?
From FRED chairman j Pals will be his last appearance here. What will you be listening for?
Because Nike everyone else, I'll be looking at the statement which is issued and also obviously in the press conference. I don't expect him to directly address the issues having to do with the allegations that have been made.
Look abby at the state of the market. We began with a historical perspective in this moment, this morning of seven thousand, right now seven thousand, excuse me, six nine hundred ninety five on SPX, there's an entire industry which is basically saying to Americans, we know you're afraid I have to be in the equity markets. Let us give you some form of hedged return where we give away
a larger capital gain. Is that a sound investment approach, which or does Joseph Cohen just say by the next marginal share of Nvidia.
I when I advise individual investors, endowments, others, I'm always taking the intermediate to longer term view. I'm not looking at short term decision making. And so from that standpoint, tom As, you know, I have been an enthusiast for the US economy. I think that the United States economy will continue to grow. There will always be hiccups. I am concerned about some of the policy decisions that have
been taken right now. I am concerned about the dollar, but I also know when we apply our CFA tools in terms of relative valuations and so on, there are some opportunities now the United States. Last year I spoke about the Japanese market, the South Korean market, and to that this year I would add the Indian market. India has had a hard time getting its stock market moving on any sustainable basis, but the companies underlying the major indices in India you're performing quite well.
Right now.
We got to leave it there, Abby, Joseph con thank you so much, and I was rude. I said, you know, she slipped out of Cornell High above cut Yugos waters.
With a DOWT one thousand. But I was wrong. It was it was like twenty thousand, five hundred when she came out of.
Cornell a few years ago, because it was icy and coal just like it is Indian work.
It is the walk up the slopes enough to kill you.
Abby Joseph Cohen Forever from Ithaca, Gulben Sachs and Columbia Business School