Panel, Conference Presentation
Macroeconomic Outlook | Global Conference 2025
Milken InstituteGregory Zuckerman, Khalid Al-Falih, André Esteves, Karen Karniol Tambour, Kathryn Koch, Ron O'Hanley
- The U.S. brand faces temporary or permanent tarnishment due to new administration tactics, though the sentiment shift away from American hegemony driven by a self-sufficiency ideology is unlikely to fully reverse.
- Global capital flows to the U.S. are vulnerable to rapid outflows given that 70% to 80% of cross-border dollars originate there, a dependency that will not vanish quickly.
- A global economic slowdown is viewed as certain, driven by policy uncertainty rather than specific tariffs, while the Federal Reserve is constrained from proactively easing rates due to political pressure and inflation risks.
- High valuations, higher rates for longer, and underlying economic weakness create vulnerability for risk assets, with every day of tariff uncertainty pushing the U.S. closer to a potential recession.
- U.S. assets are currently priced for exceptional performance exceeding the last 15 years, a forecast considered not guaranteed given current market conditions.
- Private credit is in early stages of disintermediating public fixed income with an addressable market projected to grow from $1.5 trillion to $1.8 trillion, aiming for a $20 trillion opportunity over the next decade.
- Significant dispersion in private credit manager performance is expected as vintages from the last couple of years face scrutiny, with current default rates potentially understated and likely to rise if rates remain high.
- Private credit risk is not anticipated to resemble the 2008 financial crisis as it distributes risk across thousands of investors rather than concentrating it in banks.
- Asset-backed finance represents a $20 trillion opportunity with low correlation to equity markets, expected to continue growing in importance as insurers seek excess returns.
- A global easing cycle is projected to occur but will not be led by the Fed, which is likely to fall behind the curve while waiting for data to distinguish between temporary and sustained inflation.
- Tariffs on the U.S. and China reaching 145% would function as an embargo ending trade between the two largest economies, disproportionately harming small businesses that generate most U.S. employment.
- The global economic paradigm is shifting toward a chaotic era of modern mercantilism, necessitating portfolio resilience and a potential U.S. reversion to mercantilism policies to maintain exceptionalism over a multi-year trend.
- Investors are increasingly diversifying away from excess U.S. equity and dollar exposure held over the last three to four years, though this trend is not expected to be permanent.
- Fossil fuel reserves are expected to decline over the next generation due to depletion, making the transition to renewables an imperative that must be managed carefully to avoid massive disruptions from intermittency.
- Saudi Arabia anticipates soon absorbing global economic turmoil using financial buffers and expects significant year-on-year growth in foreign investment due to perceived regional opportunities.
- The UK is viewed as a contrarian opportunity for functional reunion with the EU to benefit from distancing from the U.S., while institutional trust in the U.S. remains strong despite recent volatility.
- Bond markets act as a mechanism to correct threats to central bank independence, potentially maintaining U.S. stability, and investors can dictate favorable terms in private credit during liquidity needs by treating it as a continuous allocation.