KKR's McVey on US Markets, Fed and Trump-Xi Meeting

Economic Outlook - The Federal Reserve is expected to cut rates, but inflation remains a significant concern, with indications that the Fed will miss its mandate for seven consecutive years [1][15][16] - The current economic environment is compared to the 1990s, with a productivity boom and rising revenue per employee in the S&P 500 [2][5] Market Performance - The U.S. market is anticipated to continue performing well, with particular excitement about corporate reforms in Asia, especially in Japan and Korea [3][4] - The stock market is benefiting from a weak dollar, and there is a trend of companies going private to improve their corporate structures [4][39] Investment Trends - Capital expenditures (CapEx) and research & development (R&D) in AI are currently around 5% of GDP, indicating that the market is not yet in a bubble [6][23] - There is a high demand for skilled labor in the U.S., leading to investment themes around worker retraining and productivity enhancements [20][21] Corporate Developments - Japan is highlighted as a key market for corporate carve-outs, driven by ongoing corporate reforms and favorable financing conditions [33] - The Middle East is evolving from a fundraising region to one where investments are actively made, with partnerships between U.S. firms and Middle Eastern entities becoming more common [41][43] Global Trade Dynamics - There is optimism regarding potential trade agreements between the U.S. and China, with expectations of reduced tariffs [29][32] - China's focus on industrial automation and digitalization is expected to have a deflationary impact globally, while still fostering cooperation with the U.S. [31][32]