Let's continue that conversation with Muhammad Ali and this morning chief economic adviser at Aliance who I'm sure has been listening in. Muhammad, happy Friday. It's good to see you.Do you think this wave of unleashed data can be definitive. >> No. Um, you have deep divisions and you heard Steve say that you're likely to get three descents if they don't cut, four to five descents if they do cut.These are deep divisions getting deeper. They're getting deeper for three good reasons and one awful reasons. The ...

Market Outlook - The current market dynamics reflect a healthy push and pull, with some pullbacks and assessments of growth trends, indicating that concerns about a significant market pullback may be overstated [2][4] - A third of the S&P 500 is down 20% from its 52-week highs, highlighting a strong bifurcation in the market [2][3] Economic Dynamics - The bifurcation in the market is driven by rapid changes and innovation, leading to some companies expanding profit margins while others face challenges [4][6] - This bifurcation is expected to persist, with winners and losers becoming more dispersed than in the past [6] Investment Strategy - Investors are advised to focus on sectors and companies that are expanding profit margins and to use market pullbacks to their advantage [7][8] - There is a concentration risk in the market, but it is seen as an unavoidable feature of the current economic landscape [9] Valuation Insights - Current valuations in the tech sector are not considered extreme compared to historical levels, particularly when considering growth prospects and potential productivity gains [10] - Concerns about valuations are more pronounced in sectors like consumer staples, which are experiencing profit margin squeezes [11][12] Federal Reserve Outlook - The Federal Reserve is expected to adopt a more dovish stance, potentially leading to rate cuts in December, which could support the markets [13][14] - Labor market softness is anticipated to influence the Fed's decisions, with some sectors facing more challenges than others [14][15] Small Cap Performance - Small caps have shown some catch-up potential but are not expected to outperform large caps significantly, especially in the context of current trends and higher debt levels [16]

Market Outlook - The market has experienced six consecutive months of gains, a rare occurrence since 1928, suggesting a strong November ahead with potential increases of 200 to 250 points on the S&P [4][5] - Despite a generally bearish sentiment, with an average sentiment of -11.5% this year, the market has risen by 17%, indicating a potential performance chase by fund managers as over 80% are underperforming their benchmarks [6][7] Inflation and Economic Indicators - Inflation is reportedly declining faster than expected, with true inflation dropping to below 2%, including housing costs, and shelter inflation at 0.16% month-over-month [8][9] - More than 54% of the CPI components are currently deflating, the highest percentage since the onset of COVID-19, suggesting a shift in inflationary pressures [9] Corporate Profitability - Companies are reportedly expanding profits and profit margins despite facing tariff impacts, indicating a potential productivity boom [11] - The market is trying to reconcile the effects of AI on job consumption with corporate profitability, suggesting a complex relationship between technology and economic growth [11][12] Federal Reserve and Market Reactions - The Federal Reserve's recent hawkish stance has caused unease in the market, particularly affecting sectors like homebuilders and regional banks [10] - There is speculation that the Fed may consider cuts if inflation stabilizes and job growth does not strengthen, which could lead to a dovish outlook [12] Private Markets and Fund Performance - Fund managers are experiencing one of their worst years in nearly 30 years, with many underperforming, which contrasts with the strong performance of public stocks [18][19] - Disappointment in private equity returns is contributing to a bearish sentiment among investors, despite the stock market's overall success [19] Cryptocurrency Insights - The cryptocurrency market is consolidating after significant liquidations, with fundamentals like Ethereum stablecoin volumes and application revenues at all-time highs [20][21] - Predictions suggest potential rallies in Bitcoin and Ethereum prices towards the end of the year, with targets of 15,200 for Bitcoin and 7,000 for Ethereum [21]

So my my first guest says that some FOMC participants are probably concerned that easier monetary policies increasing financial instability are good. Let's bring in now Yardini research president and chief investment strategist at Yardini and is that what you I mean Jay Powell came out guns blazing. I he made no bones about it.Where's the quote. I think we have it up there. He's just like listen there's there's there's a not you know December is not a given.It's not a foregone conclusion. Far from it. and t ...

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]

Core Insights - Blackstone reported strong third-quarter results, raising $54 billion, marking the fourth consecutive quarter of over $50 billion raised, with distributable earnings up 50% [3][4] - The company is optimistic about the cyclical upturn in deal markets, with significant growth in M&A and IPO activities, particularly in the US [5][6] Financial Performance - Distributable earnings increased by 50% compared to previous periods, indicating robust financial health [3] - The company executed three IPOs in the third quarter across India, Europe, and the United States, a first since 2021 [6] Market Trends - The overall M&A market in the US rose by 64% in the third quarter, while the IPO market doubled, increasing by 100% [5] - The cost of capital has decreased, influenced by the Federal Reserve's rate cuts, leading to tighter spreads [5] Investment Focus - Blackstone is heavily investing in AI and data centers, emphasizing the importance of long-term leases with major companies [7][8] - The global labor cost is $60 trillion, and a 15% efficiency gain from new technologies could yield $9 trillion in annual productivity gains, justifying significant capital investments [10][11] Private Credit Market - There is a perception that the era of high private credit returns has ended, but Blackstone argues that private credit can still yield premium returns due to its direct lending model [12][14] - Despite a normalization in returns, private credit remains attractive compared to liquid credit options [14][15]

Group 1: AI's Impact on the Economy - AI capital expenditures are contributing 40% to GDP growth this year, surpassing consumer spending [1] - 80% of gains in the US stock market this year are driven by AI-related investments, with the top 10% of earners driving consumer spending [2] - The US economy is experiencing a productivity miracle attributed to AI, despite high debt and deficit levels [4] Group 2: Capital Flows and Market Dynamics - The US stock market attracted nearly $300 billion in capital inflows during a challenging second quarter, indicating strong foreign investment [7] - The dollar's weakness is partly due to overvaluation at the end of the previous year and ongoing hedging by foreign investors [6][7] - European stocks have outperformed American stocks outside of the top seven, despite pessimism about the European market [8] Group 3: Productivity Expectations - There is an implicit expectation of a 1% increase in productivity due to AI adoption, which is already showing early signs of improvement [11][12] - The focus on cost efficiencies post-pandemic has contributed to rising productivity growth, with further increases anticipated as AI is more widely adopted [10][11]

Government Shutdown and Economic Impact - The government shutdown has lasted six days with no progress in negotiations, raising concerns about potential layoffs if the situation continues [1][3] - The economic cost of the shutdown is estimated at approximately $15 billion per week, equating to about 0.1% of GDP [17] - Current GDP growth is reported at 3.8%, with retail sales up 6% year-over-year, indicating a booming economy despite the shutdown [18] Political Dynamics - There is a perception that Democrats lack leverage in negotiations, which may lead to a failure to reach a resolution [2][5] - The ongoing shutdown is viewed as a political maneuver by Democrats, who are accused of using it to gain leverage over Republicans regarding healthcare subsidies [11][15] - Moderate Democrats are reportedly dissatisfied with the current leadership and may seek bipartisan solutions to reopen the government [33][34] Healthcare and Subsidies - The discussion highlights the contentious nature of Obamacare and the expiration of COVID-related subsidies, which are seen as politically motivated rather than purely economic decisions [9][11] - There is a concern that the high subsidies under Obamacare are unsustainable and that their expiration is necessary due to budget constraints [12][15] - The potential for negotiations over healthcare subsidies may arise once the government is reopened, but current priorities are focused on keeping the government operational [19][20] Trade and Agriculture - The administration is considering using tariff revenue to support farmers affected by trade tensions, particularly with China, which has significantly reduced purchases of U.S. soybeans [28][29] - Ongoing trade negotiations with China are still in progress, despite the distractions caused by the government shutdown [32] Government Efficiency - Efforts to make government operations more efficient are ongoing, with a reported reduction of over 200,000 government positions [26] - The current situation may accelerate these efficiency efforts if the government remains closed and funding is not appropriated [27]

Capital Account columnist @greg_ip writes that a productivity boom might be taking shape, with AI helping to spur the acceleration https://t.co/AUFoUeoXW5 ...

Economic Overview - The latest economic data in the United States has shown better-than-anticipated results, supporting the positive outlook for KKR and its portfolio companies [1][2] - A significant capital expenditure (capex) boom is occurring, particularly in AI, which has outpaced growth in personal consumption [3][5] - Personal consumption, which constitutes about 70% of the economy, has seen upward revisions, indicating a potential recovery [3][5] Labor Market Insights - The unemployment rate is expected to remain low, influenced by demographic factors and a reduced labor supply [3][10] - There is a noted asynchronous recovery in the economy, with manufacturing facing challenges while the services sector performs well [7][11] - Despite some slower hiring, there is no significant wave of layoffs, contrasting with trends seen before past recessions [11][12] Federal Reserve and Interest Rates - The Federal Reserve is anticipated to shift its focus from inflation to employment, with expectations of rate cuts to support economic growth [12][15] - The housing market is currently weak, with 21% of states experiencing negative home price appreciation [15] Global Market Dynamics - KKR's portfolio, which includes 150 to 200 businesses, continues to see increased capex and stable consumer spending, suggesting a relatively safe market environment [16] - Asian markets are showing strong performance, with Korea up 60% and China up 35% year-to-date, indicating potential investment opportunities [17][18] - The trend of companies shedding unprofitable subsidiaries presents significant opportunities for private equity investments in Asia [19][20] Trade and Consumption Trends - A shift towards a tripolar trading world is emerging, with increased intra-Asian trade expected to rise from 48-50% to 70% [22][23] - Consumption upgrades in emerging markets like Vietnam and India are contributing to GDP growth, benefiting from increased trade [24] Productivity and Economic Outlook - A productivity boom reminiscent of the 1990s is occurring, driven by digitalization and automation, which may lead to higher wages and revenue growth [8][9] - Concerns exist regarding the sustainability of AI spending and its impact on GDP if returns on capital decline [25][26] - The productivity boom may lead to a lower savings rate among Americans, raising concerns about low-income credit and reinforcing the need for continued Fed easing [27][28]