Questions Bernstein's confidence in inflation returning to target and market's modest outlook for rate cuts.
Carl
Richard Bernstein
The economy is actually booming with nominal GDP over 8%. History shows Fed rarely cuts when nominal GDP is this high, and never when combined with a dollar down >10%. The notion the Fed can or should cut is imprudent.
References a Journal piece calling this an unprecedented effort to run the economy hot via fiscal/monetary policy, asking about longer-term consequences.
Carl
Richard Bernstein
The idea we can run nominal GDP even hotter while the 10-year stays at ~4.25% is 'loony tunes'. The 10-year tends to follow nominal GDP and should be higher. The US economy isn't productive enough to offset 8%+ nominal GDP without inflation.
Infers Bernstein's investment choices will lead to 'boring', less liquidity-dependent areas.
Carl
Richard Bernstein
'Boring is beautiful' is the theme for 2026. Favors dividends (short-duration equity assets) if rates are going up. Non-US markets look like the US did in 2010 - poised to outperform while consensus ignores it.
Challenges Bernstein's bond call, noting the 10-year has stayed in a tight range despite tests from good data, higher GDP revisions, geopolitical risk, and Fed credibility concerns.
Sarah
Richard Bernstein
The tight range presents the opportunity/risk. It reflects overconfidence the Fed can lower rates in a non-inflationary environment, also seen in market-derived inflation expectations. The probability inflation is higher than expected in 2026, limiting the Fed, is very high.