2026 Economic Outlook: Fed Dovishness, AI Growth, and Europe's Reforms

Key Quotes

"what is your go to sandwich at hoagie haven i knew you were going to ask me this paul you always ask me it is the heart stopper nice a delicious sandwich chicken parm egg on top there you go always good i don't care if you're a nobel laureate at princeton that's what i lead with i go with the the uh hoagie haven they haven't raised prices since 1982 by the way no inflation there and uh hoagie haven is the great leveler exactly the common denominator for all kinds of princeton university"

Lindsay Rosner explains her preferred sandwich from Hoagie Haven, highlighting its consistent quality and affordability. Rosner uses this as an anecdote to illustrate a point about value and accessibility, even within an academic environment.

"what is your federal reserve going to do tomorrow they are going to cut it is a foregone conclusion i think despite what powell has told us they are going to um the odds right now this morning if you look on the bloomberg terminal is 95 9 i take the over i think it's 100 uh they need to cut but what really we're waiting to hear and this is the part that's most important is how it is actually couched"

Lindsay Rosner expresses a strong conviction that the Federal Reserve will cut interest rates. Rosner emphasizes that the crucial aspect to watch is not the cut itself, but how the Fed communicates its decision and the reasoning behind it.

"what happens in 2026 this is actually really interesting right and why it's interesting is we've got likely a changing of the guards so powell's term ends and there should be a new chair who's likely not powell in may hasset is the front runner um he has definitely spoken to and been very clear that he is more dovish than powell and so what 2026 looks like may actually be very different than the dots we received tomorrow we think the dots are going to show one cut for 2026 we actually think that it's going to be two that's because hasset's going to be a more dovish led fed and we think that more cuts are likely to happen not the one that may be penciled in"

Lindsay Rosner discusses the potential impact of a new Federal Reserve chair on future monetary policy. Rosner suggests that if Maye Hasset, who is perceived as more dovish than Jerome Powell, takes over, the Fed's approach in 2026 could lead to more interest rate cuts than currently projected.

"yield is destiny apparently that's our quote of the day lindsay thank you so much you mentioned jobs a moment ago how concerned are you though i mean companies seem to be weathering this the tariff storm if you will but they're not exactly expanding payrolls at an impressive rate are you think it's going to just sort of be that way next year i mean because it could take a leg lower and that can really change things like gdp"

Lindsay Rosner introduces the concept of "yield is destiny" as a key takeaway for fixed income investments. Rosner then pivots to discuss concerns about the labor market, noting that companies are weathering economic challenges but not significantly expanding payrolls, which could impact GDP.

"i think there's two things one we we are in a low hire low fire as you mentioned i think that'll continue i think the second thing is we all need to start building some comfortability around a jobless recovery and what i mean by that is we've got this growth that's being driven by ai that is something that is an investment in technology if you remember back to from my princeton but others other places to econ classes you think about capital right and it can be labor or it can be technology and this is an example of technology driven capital investment that we think leads to gdp"

Lindsay Rosner explains her view on the current labor market, predicting a continuation of low hiring and firing rates. Rosner introduces the idea of a "jobless recovery," driven by AI and technology investments, which can lead to GDP growth without significant job creation.

"jamie diamond had to say recently he said that bureaucracy is having a significant impact on europe's growth prospects and in an interview over the weekend with bloomberg's caroline hyde diamond also said that a fracturing of the european continent could become a major problem for the us europe has a problem i think they accomplished an unbelievable thing but it got bogged down it takes 27 nations you know to make a decision they have some wonderful things but they've gone from 90 of the gdp of america to 65 that's not because america did anything bad to them it's their own bureaucracy their own cost"

Jamie Dimon expresses concern that bureaucracy is hindering Europe's economic growth and could pose a problem for the United States. Dimon points to the complexity of decision-making among 27 nations as a key factor in Europe's declining GDP relative to the U.S.

"i think he is i think well this separates his criticism from what we've heard from the trump administration right i mean this is he's not trying to demoralize europe from from within he is trying to remind europe of the very warnings that mario draghi former head of the ecb gave over a year ago which is that europe has a productivity gap with the us has an innovation gap has got an investment gap it has a lot of lot of work to do to get over these this slow growth issue that's weighing on europe"

Lionel Laurent agrees with Jamie Dimon's assessment of Europe's economic challenges, distinguishing it from other criticisms. Laurent explains that Dimon's comments serve as a reminder of existing warnings about Europe's productivity, innovation, and investment gaps, which contribute to its slow growth.

"the point is that the whole model has changed i mean denying it or saying that it's very hard isn't going to make it go away so i agree that it's obviously not a vote winner but that's part of the job of politics to to to explain hard truths to voters"

Lionel Laurent argues that Europe must acknowledge its outdated economic model, which relied on globalization, cheap energy, and U.S. security guarantees. Laurent states that denying these changes or finding them difficult will not alter the reality, and politicians have a responsibility to communicate these difficult truths to the public.

"i think that when elon musk claims that he's being censored by brussels i mean that that's in his interest to say that and obviously the trump administration is using that leverage because again europe is dependent on the us for not just defense but also tech it imports far more tech services than it than it exports the one hope on top of defense is for example ai we are seeing some startups come out of france such as mistral who are doing some deals with even bigger companies like asml we're seeing the sort of seeds of a more consolidated and stronger tech ecosystem coming out of europe"

Lionel Laurent suggests that claims of censorship by Brussels