Abby Joseph Cohen, professor at Columbia Business School, Talks Fed Expectations
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You have Wynne Thin with us today, who studied with Robert Mundell at Columbia University years ago. It's wonderful. You do even better if on a historic day like this, Abby Joseph Cohen decides to join us. Iconic at Goldman Sachs, now teaching at Wynne Thin's Columbia University. business school as well abby when you slid out of cornell this is just a few years ago folks the dow was just under 1 000. the dow is 49 037 right now you were a piñata in 2008. i'm going to give you the worst she made the worst call at the worst time in 2008 And the S&P 500 is up 8.6% if you made the worst call in 2008. That's better than nominal GDP. If you made the worst call in the pandemic, Paul Sweeney, you're up 105%, up 12% plus per year.
Abby, just the basic, you know, basic, basic tough. Is there an alternative to the stock market? I don't see it.
Well, let's back up a little bit, Tom, and good morning to you, Paul, as well. What we have, of course, is an American economy that was never gone. The American economy has been dominant truly since the end of the Second World War. We have been very fortunate. We have been blessed, if you will, by decades of investment in education and science and other forms of research. And so we have a stock market that is reflecting that. When I take a look at recent stock market performance, I see that investors are focused on basically corporate profits at this point, and companies have not been disappointing. Here's the question, I think, for investors, and that is with valuations at current levels, is there any room to hide if there are disappointments?
And that, to me, is an issue not just for traders, but also for long term investors.
So, Abby, how do you think the value, what's the valuation discussion we should be having about this market? Because a lot of folks are citing high valuations, but it seems like the earnings are out there to support them. How do you think about it?
The earnings clearly appear to be out there, which is great. I'm very pleased about that. I don't see a recession coming in the US this year. Also great news. And what we need to recognize, of course, and so many people who have been on Bloomberg in recent weeks have talked about this, is the ongoing rotation that we're seeing in the US stock market that is reflecting this challenging situation valuation environment in some sectors. And I think that's a healthy discussion to have. We do see that some sectors that have been laggards have been moving ahead. And we also see that some markets outside the United States have also been performing better. One of the big question marks out there, of course, is the dollar.
Right now, we have uh investors who are basically saying they're focusing on corporate profits they're focusing on cash flow the intermediate and long-term picture however to me looks somewhat cloudier particularly with this valuation overhang in some sectors
I mean, Paul Sweeney, Abby Joseph Cohen's iconic Financial Analyst Journal's paper was on Aristotle. She studied with Aristotle at her intern program at Goldman Sachs years ago. And I look at Abby and I want you to talk to people about the historical moment we're in i'm not going to bore you you know where we are gold 5300 we've got dollar i got a president tell me i want weak dollar policy let's be kind it's a neo mercantilist uh policy do you perceive the presidency of donald trump is a one-off for financial markets or is there a new reality here we have to adapt to
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