Rob Kaplan

Good to be here. Thanks for having me.

Good to be here. Thanks for having me.

So what you're seeing is a shift in that for the last couple of years, I think a lot of the focus was on the Fed. And first they're tightening and then they're beginning to ease. We're now shifting more towards structural drivers in the U.S. economy, which the Fed doesn't drive. The executive branch and Congress drive the structural drivers.

So what you're seeing is a shift in that for the last couple of years, I think a lot of the focus was on the Fed. And first they're tightening and then they're beginning to ease. We're now shifting more towards structural drivers in the U.S. economy, which the Fed doesn't drive. The executive branch and Congress drive the structural drivers.

And those include an effort to cut government spending, reduce deficits, regulatory review in every industry, an effort to restructure the energy ecosystem to lower prices at the pump. and for low-moderate-income families. We're seeing a dramatic change in immigration and immigration policy, which is reducing workforce growth.

And those include an effort to cut government spending, reduce deficits, regulatory review in every industry, an effort to restructure the energy ecosystem to lower prices at the pump. and for low-moderate-income families. We're seeing a dramatic change in immigration and immigration policy, which is reducing workforce growth.

And then the last big one is obviously tariffs, which we could spend the whole time talking about. But those are five very significant changes. The Fed is most comfortable when there's a clear outlook, and then they can adjust policy to those outlook. When you've got this many structural changes and some of them are still unclear, tariffs is a good example.

And then the last big one is obviously tariffs, which we could spend the whole time talking about. But those are five very significant changes. The Fed is most comfortable when there's a clear outlook, and then they can adjust policy to those outlook. When you've got this many structural changes and some of them are still unclear, tariffs is a good example.

I think the Fed has to wait until some of these decisions clarify. And the other reason to wait is we still have an inflation issue. And so the Fed has to be patient for this to clarify because they're still trying to make sure people know they're fighting inflation.

I think the Fed has to wait until some of these decisions clarify. And the other reason to wait is we still have an inflation issue. And so the Fed has to be patient for this to clarify because they're still trying to make sure people know they're fighting inflation.

So the economy is reacting to these structural changes. We started the year, I think most economists might have called for two and a quarter, two and a half percent GDP growth. Those estimates have steadily declined. probabilities of recession have increased. What we're actually seeing in the economy in terms of the real data is shipping is down, travel is down, tourism is down.

So the economy is reacting to these structural changes. We started the year, I think most economists might have called for two and a quarter, two and a half percent GDP growth. Those estimates have steadily declined. probabilities of recession have increased. What we're actually seeing in the economy in terms of the real data is shipping is down, travel is down, tourism is down.

Most companies I talked to in the first quarter, business has been not great, but it's been solid. And even today, they haven't seen a substantial fall off, but they're expecting it. And that's where we are right now.

Most companies I talked to in the first quarter, business has been not great, but it's been solid. And even today, they haven't seen a substantial fall off, but they're expecting it. And that's where we are right now.

Stagflation means slower growth and stickier prices. So we obviously just got the actual GDP number for the first quarter, although it'll be subsequently revised, but was negative. Not surprising. It was a little disappointing to some. And you see economists slowing down their growth estimates for the year. So why are they doing that? Government spending cuts, slow growth.

Stagflation means slower growth and stickier prices. So we obviously just got the actual GDP number for the first quarter, although it'll be subsequently revised, but was negative. Not surprising. It was a little disappointing to some. And you see economists slowing down their growth estimates for the year. So why are they doing that? Government spending cuts, slow growth.

Regulatory reform should help productivity, would help growth, but it takes time. Immigration reduction, workforce growth reduction, slow growth. And tariffs, probably slow growth, but also create a cost push that might actually cause prices to be stickier. And that's what the Fed's trying to figure out.

Regulatory reform should help productivity, would help growth, but it takes time. Immigration reduction, workforce growth reduction, slow growth. And tariffs, probably slow growth, but also create a cost push that might actually cause prices to be stickier. And that's what the Fed's trying to figure out.

And so, yeah, that combination means slower growth and stickier prices, at least in this first phase. And that's why you hear people talking about stagflation.

And so, yeah, that combination means slower growth and stickier prices, at least in this first phase. And that's why you hear people talking about stagflation.