Last Monday, UC Chief Investments Officer Jagdeep Bachhar had a Zoom conversation with Blackrock executive Rick Rieder, who handles fixed investments (bonds) on "The Real Economy." During the conversation, Bachhar indicated such conversations might occur in the future on a monthly basis.
It might be noted that Blackrock is among the firms singled out by anti-Israel protesters at Regents meetings during public comments, although there have also been demands for divestment of Blackrock for allegedly following ESG practices (i.e., avoiding fossil fuel investments - which Blackrock denies).* Yours truly suspects the UC CIO is sending a message beyond that of the economic outlook.
That said, Rieder had various observations about the outlook.
1) He expects that when the tariff war settles down, there will be something like a 15% tariff around the US. Rieder used the phrase "effective tariff," but that phrase as a special meaning in international trade lingo.** I suspect he loosely meant an average tariff. He argued that President Trump needs the tariff revenue that will be collected given the US budget deficit and mounting debt.
2) There will be some return of manufacturing as a result of tariff protection, notably in pharma and chips, but not in such labor-intensive areas such as apparel. He used the phrase "social tariff" which - if memory serves - is a concept that Ross Perot pushed back in the day to describe a level of job protection.
3) He expects some kind of economic slowdown - I didn't hear "recession" - from the current turmoil. In the short term, portfolio managers are moving towards cash. Sectors such as health care and education, which normally are stable sources of employment are at risk due to federal spending cuts. Hospitality and restaurants are at risk due to threats to the immigrant labor force.
4) The Federal Reserve may due some interest rate cuts, but not on the scale forecasters projected before the current turmoil. In part, the problem is that without lower rates, federal debt service expenses are ballooning. Fed chair Powell will probably get to serve out his term which ends May 2026 despite Trump's grumbles about him. Meanwhile, the Treasury needs to refinance the federal debt with longer-duration bonds for more stability.
5) Foreign countries are moving away from the dollar to hold reserves. There are moves into other currencies and gold. He hinted at, but did not explicitly reference, a kind of run on the dollar. (That kind of development, if rapid, could produce a financial crisis. Or it could simply lead to dollar devaluation which might be what Trump & Co., may want, even if they don't say so. A lower dollar, other things equal, promotes exports and retards imports. It could also raise prices.)
6) New technology, i.e., AI and related, will eventually boost productivity growth but maybe not immediately.
That's the summary courtesy of yours truly. But if you want to see the discussion, it is available at:
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**The "effective tariff" on a product weighs the negative effect of tariffs on its inputs against the positive effect of the tariff on the product itself.
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