00:00Joining us now is Abby Joseph Cohen, Columbia Business School professor and retired Goldman
00:05Sachs partner and great to have you on the day that we crossed through the 7,000.
00:10Threshold on the S&P 500. I know it doesn't mean a lot fundamentally but it is a.
00:15Big round number and I wonder what your take is on this.
00:20Continued AI boom, you know, ASML.
00:25CEO said just now his customers are starting to realize.
00:30That it's sustainable and so are aggressively building up their equipment.
00:35Well, I'm delighted to be here with you today and I'm glad that you said.
00:40That sometimes those big round numbers themselves don't really mean very much.
00:45Although it's fun to look at.
00:46I prefer, however, of course, to look at what's going.
00:50Going on in the economy and in the corporate sector and you're right many of these technology.
00:55Stocks continue to perform extraordinarily well, even if.
01:00We discount out some of that circular financing that we're seeing in that.
01:05Industry, we do see that there's this ongoing appreciation.
01:10If you will, for the potential of AI, what we're seeing, however, in many industries.
01:15Is that that potential has not yet been fulfilled and one possibility.
01:20For later this year is we'll see a deceleration in the rate of expansion.
01:25In this category, not saying a decline, but rather a deceleration.
01:30And that's something to look out for.
01:33And as we do that, as we think.
01:35About where other opportunities may be.
01:37We see there are other sectors of the equity.
01:40market that are offering very good valuation, good corporate profit growth, good.
01:45corporate cash flow as well.
01:47Abby, does that broadening change at all if we continue to.
01:50We see weakness from the dollar.
01:51The common convention is that international.
01:55Stocks do better if you have a weaker dollar.
01:57Maybe domestic stocks underperform.
01:59Well, would that.
02:00hurt a broadening out, especially if you are hoping for smaller companies to do.
02:05better in the year ahead.
02:06I don't think the weakening.
02:08I don't think the weakening.
02:10of the dollar will have that sort of impact because keep in mind that the U.S. equity market.
02:15For all of our discussion about global markets, ours is pretty much a closed market.
02:21Domestic investors really drive what's going on.
02:24There are.
02:25Other concerns I have about the weakening of the dollar.
02:28First of all, it's very unusual.
02:30There are some other concerns I have about the weakening of the dollar.
02:31First of all, it's very unusual.
02:30for the president of the United States to say that he's okay with a weaker dollar.
02:35All other things being equal, a weaker dollar does mean higher inflation.
02:40A weaker dollar does mean potentially higher interest rates.
02:45typically in the intermediate and long end of the yield curve.
02:48And that's something I would be concerned about.
02:50That has an impact, of course, on overall equity valuation.
02:55The rotation that I think we'll be seeing in the equity market is to different sectors.
03:00By industry, I also think small and mid cap stocks can do well.
03:05And with regard to U.S. investor interest in non-U.S. markets,
03:10last year I spoke about East Asian markets, particularly Japan and South Asia.
03:15South Korea is two examples.
03:17And now I'd be looking at India, the Indian economy.
03:20The Indian economy seems to have its footing.
03:23The large companies that dominate the economy.
03:25The India stock market index.
03:30are actually performing quite well as companies.
03:33You know, Neil.
03:35Neil Dutta's argument is that this dollar weakness is not due to institutional breakdowns.
03:40or Fed capture, but instead that Trump administration policies
03:45are pushing our allies and those who aren't our allies
03:50allies and other countries to act and boost growth outside of the U.S.,
03:54which mechanically
03:55weakens the dollar.
03:56So which is it?
03:57Is this a
04:00a loss of confidence in U.S. policy trade or is it a rest of the world growth finally
04:05catching up again trade?
04:06I think we can argue both of those.
04:10In some cases, but I'd be inclined to look at the rest of the world doing better.
04:15And the rest of the world deciding to move a little bit away from a dollar.
04:20based economy.
04:21We certainly see that in China for the last several years.
04:25We've been trying to enhance the role of the Renminbi in terms of their own foreign
04:30trade, regional trade packs in Asia, for example, often are no longer denominated
04:35in U.S. dollars, but rather in Renminbi.
04:38We also see that in commodity companies.
04:40We also see that in the U.S. contracts in Asia and so on.
04:43You know, one of the things that I'm not.
04:45An expert to speak about, of course, is the role that all of this is playing.
04:50In the gold trade, we certainly are hearing from any number of sources.
04:55That sovereigns, be it China and other governments as well.
05:00are acquiring gold as sort of a ballast against some of their concerns.
05:05about the dollar.
05:06But keep in mind, for the last 30 years, there have been discussions.
05:10about the dollar losing some of its primacy as the.
05:15world's reserve currency and maybe seeding some of that income.
05:20That's a combination with other currencies as those nations see.
05:25economic growth.
05:26Abby, it feels like this idea of trying to turn away from the U.S. got an
05:30extra boost at Davos with Mark Carney talking about middling countries coming together.
05:35making a deal with the Chinese for EV factory plants.
05:38We know China for some time has been.
05:40trying to steer away from U.S.
05:42tech dominance and trying to look for other sources besides.
05:45media.
05:46This also just crossed the terminal that the EU is on gas from Qatar and Canada.
05:50media.
05:51to reduce reliance on U.S.
05:52LNG.
05:53Abby, I know at the moment the dominance.
05:55of America business, American energy, all of that in the American consumer.
06:00is ever present and hard to get away from, but in the longer term, do you expect.
06:05a real change to the world's global order and the dominance and the ability of the.
06:10U.S.
06:11to really have staying power for these various countries and I guess corporate.
06:15America too then.
06:16The world's largest economy is still the.
06:20U.S.
06:21But as a percentage of total, we have gotten somewhat smaller.
06:25And a good deal of that is because other nations are now performing well.
06:30the bigger concern that I would have has to do with the erratic nature of government.
06:35policy coming out from some factors and portions of the U.S.
06:39government.
06:40the erratic nature of our trade policy, for example, is not.
06:45It's not helpful when it comes to other nations and the corporates in those.
06:50other nations trying to decide how they want to structure their intermediate.
06:55and long term business plans.
06:57Abby, we're going to have to leave it there.
06:59It is so fantastic.
07:00to have you on.
07:01Please come join us again soon.
07:02Abby Joseph Cohen of the Columbia Business School.
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