Rob Kaplan
speaker
163 appearances
5 recordings
3 series
first heard May 2025
last heard 22 May
Rob Kaplan’s voice in public audio — every appearance, attributed to the second.
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recordings per month · last 12 monthsRecordings per month over the last 12 months — 4 in all, peaking in May 2026 with 3.
Appearances
That's less than the market expects, but I want to do that deliberately in that I want to leave our options open depending on what happens with these tariff and other decisions, and I don't want to be in a position where we sort of indicated to the market we're going to do more than we're really able to do.
And so I think the market is likely to be disappointed with the Fed forecast in June for how much they're going to do. That doesn't mean they won't do more. It means they want to retain their operating flexibility. And again, I've said this, you want to be, in this period, a risk manager, not necessarily a prognosticator.
So you look at all of it. You look at the soft data. You look at the hard data. And I know from experience, sometimes weakness in the soft data doesn't always translate into what happens with the hard data. And also, you've got governments in the midst of making decisions that can change sentiment. The one piece of soft data that I would rank above many of the others is is inflation expectations.
The Fed is very focused not only on bringing inflation down to two, but making sure that inflation expectations remain anchored so that people still believe the 2% goal is credible.
that if inflation expectations start to inch up, then maybe businesses start to preemptively raise price. Consumers start to buy thinking prices are going up. We just saw that recently, but where consumers increase their purchases, we think, because they thought prices are going up. That means inflationary expectations are moving up. You do not want that at the Fed. You want them to be anchored
because if they become unanchored and behavior changes as a result of it, it's harder to get to the 2% target. So they're going to be watching that very carefully. So if you see Jay Powell or other Fed speakers sound more hawkish, I would be too. Even if I were thinking I want to look for a way to cut, I would talk hawkish because I want to keep these inflation expectations anchored.
They're moving up and they're moving in the wrong direction. And it does reflect behavior on the ground. Businesses are preempting. There's a new word in the dictionary. It's called surcharge. And I always heard the word, but it's on bills now. There's a surcharge and it's for either current or anticipated tariffs. And consumers are starting to get in their mind that prices are moving up.
You want to anchor that. And the best way right now the Fed can do that is jawboning. So people shouldn't misinterpret it. Gee, Jay Powell sounded very hawkish. That means they're not going to do X, Y, or Z. No, to me, it means he wants to keep their options open and he wants to anchor inflation.
I talk to investors around the world too.
So for businesses, by and large, they'll adjust. But what's hard for them is something that happens abruptly. So if there's a well-telegraphed change, they have time to adjust to it. The auto companies are a good example. In a couple of years, over a year or two, they can make adjustments. They can make investments. They can change locations.
But if it happens abruptly, which this has, a lot of businesses I talk to have a number of things they're working on to adjust. But what they're saying to me is, I just can't do it overnight. Might take me six months, 12 months. I can inch away different things.
In the meantime, they have to make plans on how much they're going to take out of margin, how much they're going to put in prices, how much is going to come out of dollar strengthening, although we're going the other way right now. That's what businesses are doing. And they'll adjust to it, but they're working on it. On investors, investors are not just looking at tariffs.
They're looking at the whole mosaic. And what I hear more and more from investors now is there's a lot more uncertainty in USMCA was an agreed trade agreement. They see some of the other things going on with higher education, other things that are a little jarring and surprising coming out of the United States.
And what they're starting to think is maybe we started the year being over allocated the dollar in US assets. Maybe we should be rebalancing and reducing our dollar, not eliminating, but reducing our dollar exposure because there's enough unpredictability. And they're asking more questions.
Is the institutional framework, is the predictability, which is one of the reasons I wanted to invest in the U.S., is that deteriorating? And that's causing people to change asset allocation.
They are already either making plans or starting to act on plans. Here's the issue. And I'll give you a good example. Many folks, companies I talked to, had moved some manufacturing from China to Vietnam. Now we've got a very high tariff on Vietnam. So if we move to Vietnam, do we stay there and hope there'll be a trade agreement, or do we move?
And they're trying to make risk management decisions. The one decision that many are struggling with is how much can they move to the United States. We know that's the one place where we won't have a tariff. However, costs are higher. is this going to be a globally competitive investment?
And if the only reason it's competitive is a tariff moat, what if that tariff moat goes away in four or five years? So that's one of the issues folks are wrestling with. And also, they're talking a lot about, can we use technology to lower the costs? And so you'll see a lot of this manufacturing that does get moved here, I would guess, is going to be heavy use of technology, 3D printing,
other methods to lower the cost.
And so let me just put all this in context because it's easy to lose sight of this. The U.S. economy is predominantly a services economy. We manufacture in the United States, I'll pick another 13 or 14 percent of GDP. We import let's say, 10%, 11%, 12% goods. And global manufacturing as a percentage of GDP globally is declining.
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