Hawkish Fed Minutes Drag Stocks From All-Time Highs

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This is Bloomberg Businessweek Daily, reporting from the magazine that helps global leaders stay ahead. With insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily Podcast, with Carol Massar and Tim Stenovec.

Carol Massar (0:32)

We've got a lot of big thinkers that are coming at us right now. JP Morgan's Jamie Dimon spoke exclusively to Bloomberg yesterday.

Nassim Tlaib, he, of course, who popularized the phrase black swan. Also out with some comments, Ray Dalio. We've been covering all of this. So too though, is a big thinker, our next guest, which is why we are delighted to have some time to actually dig into some of what ails us, what questions that are out there when we look at the marketplace. Jeffrey Rosenberg, Managing Director, Portfolio Manager, Systematic, Multi-Strategy, Fund at the World's Largest Asset Manager. We are talking about BlackRock. They've got some $15.3 trillion in assets under management. It's a firm and an individual very well known to the Bloomberg audience. Welcome. Well, thank you.

Jeff Rosenberg (1:13)

That was a very esteemed company to be in on your intro. So we'll do our best.

Carol Massar (1:19)

No pressure, no pressure. But I think we are leaning on a lot of different voices to kind of understand the way forward. I love folks that have seen market cycles, seen crises and understand some things. What do you, how would you describe the environment right now? Everybody talks, we're talking about American exceptionalism a little bit again this week.

We see growth. Seems like the Fed is managing things. But how would you describe it?

Jeff Rosenberg (1:43)

Well, I think we're really just talking about artificial intelligence. That is the theme. We're in the midst of a unprecedented historical, by historic standards, investment wave. There's been a lot of interesting stuff written about it recently, comparing investment as a share of GDP to canals, to railroads, to electricity, to the telecom infrastructure build out. This wave will eclipse all of those.

It's AI everywhere all the time.

Carol Massar (2:15)

I did not expect you to start there. It's all we talk about.

Jeff Rosenberg (2:21)

It's a macro theme as well.

I spend most of my time in interest rates and in macro, but the macro theme spillover is that AI is the primary driver of above trend growth. It is an investment-led growth, but it is also consumption-led growth, because the wealth side of the AI, everything you talk about here on the program, today's equity market moves, you talked about it earlier, the concentration story, that is all downstream effects from AI. So almost everything traces back to the AI story. In interest rates, if we talk about the worry about the big increase in the bond market, interest rates, what's happening? Well, part of that is AI-related, because it's the competition for capital that the AI investment boom has completely turned around an old, old story, which we once had, Larry Summers' Secular Stagnation. Not enough investment demand, too much supply of savings. That led to very, very low interest rates, and today it's the opposite. Not enough global savings to fund an incredible demand for investment and investment opportunities.

Tim Stenovec (3:26)

Well, since you mentioned AI, and Carol, you mentioned before Ray Dalio, so he talked about the AI bubble. What do you think of it? Is it too much? I mean, is it going to burst?

Jeff Rosenberg (3:35)

So I want to kind of steer away from the bubble language because there's a lot of headlines on it, a lot of people talking about it.

It's loaded language because of our experience with bubbles. I think we have to think about this less from kind of market bubble psychology and much more from like the fundamental investment case, which is really unique here. And what's unique is that this is an expansion of the capacity, right? So there's AI, but what we're really doing in the investment world is the infrastructure build, right? That's why it's hitting the real economy. So this is data centers and this is transmission and this is chips and this is energy. So it's affecting the real economy long before the impact. And we're talking about, you know, our adoption of AI, but that whole adoption is in front of us. What's with us right now is the infrastructure build at. And what's really critical is that as much infrastructure is being built, the supply side is still dwarfed massively by the amount of demand that we're seeing. And the demand shocks that we continue to see. When I say demand shock, what do I mean by that? I mean that every time we think we kind of understand AI, oh, it's a chat bot, oh, it's replacing my search engine, oh, it's...