You Can't 'Jawbone' Down Energy Prices, Rubenstein Says
Speakers
Summary
- Recent CPI numbers are comforting but fail to capture real-time energy price increases that will impact upcoming inflation data.
- The Federal Reserve is highly unlikely to cut rates at the March 18th FOMC meeting because they must monitor the inflationary impact of recent energy shocks.
- Political "jawboning" and PR campaigns are ineffective at lowering energy prices, which are dictated by global geopolitical events rather than US domestic policy.
- Geopolitical risks, particularly the Russia-Ukraine war and potential blockages in the Straits of Hormuz, pose ongoing upside risks to energy prices.
- Fears regarding systemic defaults or "cockroaches" in the private credit market (especially tied to software loans) are overblown; portfolios remain resilient as long as a severe recession is avoided.
Trade Ideas
My guess is that probably you won't see any rate cuts. Energy prices are probably going up a little bit more than the CPI numbers suggest today. The market has been eager for rate cuts, but rising energy costs will keep inflation stickier than backward-looking CPI reports indicate. This will force the Federal Reserve to hold interest rates higher for longer, which is a hostile environment for long-duration Treasury bonds. SHORT long-duration Treasuries as sticky, energy-driven inflation forces the Fed to delay anticipated rate cuts. A sudden macroeconomic shock or severe recession forces the Fed into emergency rate cuts regardless of energy-driven inflation.
If there's any part of the world's economy that is not subject completely to what the US wants, it's energy prices. Trying to jawbone down energy prices doesn't often work. If the Straits of Hormuz are blocked for some time, that's going to have a big impact. Political administrations cannot control oil prices through PR campaigns. Because energy prices are dictated by global supply and geopolitical conflicts, ongoing tensions will keep prices elevated. This provides a strong fundamental floor and upside catalyst for direct oil trackers and broad energy sector equities. LONG oil and energy equities as structural supply risks and geopolitical conflicts outweigh domestic political pressure to lower prices. A sudden peace agreement or rapid de-escalation of global conflicts would remove the geopolitical risk premium, causing energy prices to drop.
Private credit is in relatively good shape. A relatively small percentage of them have had any default issues. I don't really think there's a big problem right now in private credit default ratios. The broader market is overly fearful of systemic defaults in private credit, specifically regarding software loans. Because these portfolios are actually resilient and a near-term recession is not expected, major alternative asset managers will continue to collect strong yields and management fees without suffering the massive write-downs the market is pricing in. LONG alternative asset managers with heavy private credit exposure, capitalizing on the disconnect between market fear and actual portfolio performance. An unexpected, severe economic recession could trigger the exact wave of defaults and liquidity stress that the market is currently fearing.
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This Bloomberg Markets video, published March 11, 2026, features David Rubenstein discussing TLT, USO, XLE, BX, APO, KKR, CG. 3 trade ideas extracted by AI with direction and confidence scoring.
Speakers: David Rubenstein · Tickers: TLT, USO, XLE, BX, APO, KKR, CG