Everybody Wants Fed Independence, Rubenstein Says

Summary

David Rubenstein discusses the equity market rally fueled by AI IPO speculation and hopes of war ending, while bond markets struggle with US debt and Fed policy constraints. He advises investors to temper return expectations, favoring private credit as resilient. He also comments on Fed independence under Kevin Warsh and midterm election dynamics.

• Equity markets driven by animal spirits from anticipated IPOs of OpenAI, SpaceX, and Anthropic.
• Bond markets pressured by high US federal debt and difficulty lowering interest rates.
• Fed under Kevin Warsh likely to face challenges cutting rates amid inflation and bond market signals.
• Private credit expected to perform reasonably well with higher rates and low defaults unless recession hits.
• Investors should target high single-digit to low double-digit returns, not outsized gains.
• AI valuations are fairly full; IPO investors may sell shares rather than hold forever.
• War outcome is key to economic and market trajectory.
• President likely to lose House seats in midterms but not as many as historical averages.