Previewing the Fed Meeting and AI IPOs | Bloomberg Surveillance

Robert Kaplan argued the economy is splitting in two: AI and defense spending remain strong, while housing, autos, and lower-income consumers are sluggish. He said the Fed’s key job is separating supply from demand in inflation, warned that diesel-driven price pressures can spread widely, and said rate hikes should be deliberate because pushing too far could damage already weak parts of the economy. He also pushed for more immigration, balanced regulation, and entitlement reform to support productivity and keep deficits from worsening the long end of the curve.

Gary Gensler said the AI boom is likely to decelerate and then reverse within 18 to 30 months, with the timing and severity depending on debt in the system. He pointed to Anthropic’s S-1, Meta’s $90 billion equity offering, and Broadcom’s $63 billion package as signs of exuberance, and warned that many data-center financings resemble the off-balance-sheet excesses of 2008. Still, he said the U.S. should keep markets merit-neutral if disclosures are clear, while the Fed must decide how a slowdown would affect inflation and growth into 2027 and 2028.

Mike Wilson said the market correction has mostly happened under the surface since June, and he still wants investors to stay with quality and the large-cap leaders. Colin Graham argued that a stronger dollar, higher financing costs, and tight European conditions are pushing the floor for volatility higher, even as U.S. growth remains supported by nominal GDP. He said France is especially exposed because it lacks the growth buffer that the U.S. still has.