How to find alpha: Bridgewater Associates' Co-CIO Karen Karniol-Tambour
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Welcome back to another episode of Goldman Sachs Exchanges Great Investors. I'm your host, Tony Pasquariello, global head of hedge fund coverage for our global banking and markets business, and today I'm thrilled to be joined by my friend Karen Carniel Tambor who is co chief investment officer at Bridgewater Associates, the world's largest hedge fund. At Bridgewater, Karen oversees the systemization of the research into trading strategies, manages the development of proprietary investment models, and directs the design and implementation of client investment strategies. Karen also co leads the
to be here, Tony. I
want to talk a little bit about the US macro landscape. As we sit here today, things are in a friendly place. US GDP growth is tracking around 3%. The Fed obviously just cut rates by 50 basis points. So let's start with your outlook for the economy. Can the US sustain this level of growth? I
actually think it can. It's a very unique spot to be in so late into an expansion. Mhmm. But you have this expansion where, you know, the Fed already raised rates. Right? So it's cut off all the borrowing by anyone in the private sector. And typically, obviously, that causes a recession. This time around, it was offset by kind of the tail of the fiscal coming out of COVID, plus the fact that that was kind of the time where the income cycle took off and you started getting this self reinforcing cycle where spending leads to more income, leads to more spending. That's a much more sustainable way
And so let's spend a minute on that piece on the fed. Again, we've we've entered kind of the next stage of the game in monetary cycle. So where do you see this ending up? IE, where do you see the terminal funds rate? And then how do you think we get there in terms of clip size and and duration?
So what is the right level of interest rates? A very almost philosophical question. Right? And, what I think everybody knows is that it's definitely very different than the right level of rates was some number of years ago. So we had Pre
COVID post GFC. So
post GFC, I mean, we had that's a more than a decade where we had negative real rates. Sure. Very unusual. Clearly, that's not the right level of rates anymore. You don't need to have a deleveraging happen anymore. And some of these structural spending pressures that I talked about before, whether it's businesses that need to invest for AI or we haven't talked yet about government and all their need to do industrial policy, there's real needs to spend. So the right level interest rate is definitely not 0 or negative. If you look at the Fed, the Fed thinks it's about 3 made up of about 2 ish pe
And so if I said, we think they end up around 3 3 eights come June, which require basically 25 basis points every meeting from here to there, does that sound about right to you? I
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