Abby Joseph Cohen, professor at Columbia Business School, Talks Fed Expectations

Summary

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Bloomberg Talks: Abby Joseph Cohen on Fed Expectations & Market Outlook

Date: January 28, 2026
Guest: Abby Joseph Cohen, Professor at Columbia Business School, longtime Goldman Sachs strategist
Host: Tom Keene and Bloomberg Team

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Episode Overview

In this episode, iconic Wall Street strategist Abby Joseph Cohen joins Bloomberg to discuss current U.S. stock market valuations, expectations for the Federal Reserve’s next moves, and broader economic policy themes shaping the 2026 investment landscape. The conversation covers the resilience of the American economy, shifting global investment opportunities, and the policy implications of recent U.S. fiscal and monetary decisions—with Cohen blending historical context, market data, and a bit of wit.

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Key Discussion Points & Insights

1. The Resilience of the U.S. Economy

[02:26]

• Abby Joseph Cohen contextualizes the market’s long-term growth:
  • The U.S. economy "has been dominant truly since the end of the Second World War,” resilient thanks to investment in "education and science and other forms of research.”
  • Recent stock market performance is "reflecting that" structural strength.
• Market focus is now on earnings and profits rather than macro fears.

2. Valuation Concerns and Sector Rotation

[03:41 – 04:49]

• Despite high valuations, "the earnings clearly appear to be out there, which is great...I don't see a recession coming in the US this year.”
• Ongoing rotation within the market: “Some sectors that have been laggards have been moving ahead,” and some international markets are also outpacing the U.S.
• Intermediate to long-term outlook is “cloudier, particularly with this valuation overhang in some sectors.”
• She warns that at “current levels, is there any room to hide if there are disappointments?” signaling limited downside protection if earnings slip.

3. U.S. Policy Mix: Inflation and the Dollar

[05:40 – 07:47]

• Cohen cites “a broader policy mix which is not necessarily all that favorable on a long term basis.”
• Trade policy, fiscal stimulus, and a weaker dollar all “push inflation higher, not lower.”
• The administration’s openness to a weaker dollar is “un thing for the President of the United States to be saying,” and suggests acceptance of higher inflation risk.
• The Fed, while the focus of immediate market attention, “controls only the Fed funds rate, only the very short term rate.” Long-term borrowing rates may face “problematic” upward pressure from policy and market factors beyond the Fed’s direct control.

4. Regulatory Interventions: Credit and Mortgage Markets

[07:47 – 08:00]

• Abby notes new discussions of “controls on the mortgage markets” and the administration’s push to “tell banks what credit card rates they should be.”
• “This is something that we've not seen in a very long time,” hinting at revived regulatory activism.

5. Investment Strategy: Global Opportunities

[09:16 – 10:24]

• Cohen steadfastly recommends taking "the intermediate to longer term view" for individual and institutional investors.
• She highlights the U.S. market’s prospects but points to attractive valuations and momentum “outside the United States”:
  • “Last year I spoke about the Japanese market, the South Korean market, and to that this year I would add the Indian market.”
  • Indian companies “underlying the major indices in India [are] performing quite well right now,” even if the market as a whole has struggled to sustain surges.
• On “hedged return” products versus direct equity ownership: She prefers broad, long-term exposure over complex strategies.

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Notable Quotes & Memorable Moments

“Here's the question, I think, for investors: with valuations at current levels, is there any room to hide if there are disappointments? And that to me is an issue not just for traders but also for long-term investors.”
— Abby Joseph Cohen [02:50]

“The earnings clearly appear to be out there, which is great. I'm very pleased about that. I don't see a recession coming in the US this year. Also great news.”
— Abby Joseph Cohen [03:41]

“We have a situation right now where...the trade policy we have pushes inflation higher, not lower. The fiscal policy...will stimulate economic growth in 2026...but all else equal, that too pushes up inflation, as does the weaker dollar.”
— Abby Joseph Cohen [06:00]

“The Fed...controls only the Fed funds rate, only the very short term rate, only the rate that banks borrow at. The rate of borrowing for everyone else in the economy is done further out along the yield curve. And that could be problematic...”
— Abby Joseph Cohen [06:40]

"I'm always taking the intermediate to longer term view...I have been an enthusiast for the US Economy. I think that the United States economy will continue to grow. There will always be hiccups.”
— Abby Joseph Cohen [09:16]

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Important Timestamps

• [02:26] — U.S. economic dominance & market growth context
• [03:41] — Current state of valuations and recession outlook
• [05:40] — U.S. policy mix: inflation, fiscal stimulus, weak dollar debate
• [07:47] — Discussion of regulatory intervention in credit/mortgage markets
• [08:14] — Anticipation of Fed Chair Jay Powell’s remarks
• [09:16] — Investment strategy: long-term view, U.S. market, and global highlights

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Tone & Style

• Abby Joseph Cohen is pragmatic and historically minded, blending optimism about the U.S. economy with caution about select policy moves.
• She uses humor—correcting a joke about studying with Aristotle (“it was Sophocles” [05:30])—to break up the technical discussion.
• The hosts blend reverence and gentle teasing (“You were a pinata in 2008...”; “don't drink the beverage” [05:36]) while driving the discussion toward big-picture themes.

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Summary

This episode offers a clear-eyed assessment of the U.S. investment landscape in 2026: solid economic fundamentals underpin strong corporate earnings and equity markets, but potential risks loom in the form of higher valuations, inflationary policies, and unconventional regulatory actions. Cohen reassures long-term investors about continued U.S. economic strength, advises attention to global opportunities (notably India), and frames current conditions as a delicate balance between optimism and vigilance. Listeners gain both historical perspective and actionable insight—Cohen’s trademark.

Transcript

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[Tom Keene]

Luck on foreign exchange. You have win thin with us today. Who studied with Robert Mandela, Columbia University years ago is wonderful. You do even better if on a historic day like this, Abby Joseph Cohen decides to join us. Iconic at Goldman Sachs, now teaching at Winthens Columbia Business School as well. Abby, when you slid out of Cornell. This is just a few years ago, folks. The Dow was just under 1,000. The Dow is 49,037 right now. You were a pinata in 2008. I'm going to give you the worst. She made the worst call at the worst time in 2008 and the S&P 500 is up 8.6%. If you made the worst call in 2008, that's better than nominal GDP. If you made the worst call in the pandemic. Paul Sweeney, you're up 105%, up 12% plus per year. Abby, just the basic, you know, basic, basic tough. Is there an alternative to the stock market? I don't see it.

[Abby Joseph Cohen]

Well, let's back up a little bit, Tom. And good morning to you, Paul, as well. What we have, of course, is an American economy that was never gone. The American economy has been dominant truly since the end of the Second World War. We have been very fortunate. We have been blessed, if you will, by decades of investment in education and science and other forms of research. And so we have a stock market that is reflecting that. When I take A look at recent stock market performance. I see that investors are focused on basically corporate profits at this point and companies have not been disappointing. Here's the question, I think for investors and that is with valuations at current levels, is there any room to hide if there are disappointments? And that to me is an issue not just for traders but also for long term investors.

[Host]

So Abby, how do you think the value, what's the valuation discussion we should be having about this market? Because a lot of folks are citing high valuations but it seems like the earnings are out there to support them. How do you think about it?

[Abby Joseph Cohen]

The earnings clearly appear to be out there, which is great. I'm very pleased about that. I don't see a recession coming in the US this year. Also great news. And what we need to recognize, of course, and so many people who have been on Bloomberg in recent weeks have talked about this is the ongoing rotation that we're seeing in the US stock market that is reflecting this challenging valuation environment in some sectors. And I think that's a healthy discussion to have. We do see that some sectors that have been laggards have been moving ahead and we also see that some markets outside the States have also been performing better. One of the big question marks out there of course is the dollar. Right now we have investors who are basically saying they're focusing on corporate profits, they're focusing on cash flow. The intermediate and long term picture, however, to me looks somewhat cloudier, particularly with this valuation overhang in some sectors.

[Tom Keene]

I mean for Paul Sweeney, Abby Joseph Cohen's icon, a financial analyst journal's paper was on Aristotle. She studied with Aristotle in her intern program at Goldman Sachs years ago. And I look, Abby and I want you to talk to people about the historical moment we're in. I'm not going to bore you. You know where we are. Gold 5300 we've got $. I got a president tell me I want weak dollar policy. Let's be kind. It's a neo mercantile policy. Do you perceive the presidency of Donald Trump is a one off for financial markets or is there a new reality here we have to adapt to?

[Abby Joseph Cohen]

Well, I'd like to correct you if I may. I didn't study with Aristotle. It was Sophocles.

[Tom Keene]

Okay, don't drink the beverage.

[Abby Joseph Cohen]

But, but, but, but. There you have it. I'll stay away from, from that as well. We have a situation right now where I think that investors and especially traders are really focused on the very short term. What's the profit picture? Is the Fed going to adjust short term interest rates and so on. And we have nevertheless a broader policy mix which is not necessarily all that favorable on a long term basis. So, for example, the trade policies which have been implemented, all other things being equal, notice I use the keteris paribus in there. But all of the things being equal, the trade policy we have pushes inflation higher, not lower. The fiscal policy we have right now will stimulate economic growth in 2026 through the depreciation allowances, through the extra checks that middle income families will be receiving. But all of the things being equal, that too pushes up inflation, as does the weaker dollar. And so when we have the President saying, as he did, he's okay with a weaker dollar, which is rather un thing for the President of the United States to be saying, that basically tells us something about the intermediate to longer term view. Because keep in mind the Fed, whatever it decides to do today, the Fed controls only the Fed funds rate, only the very short term rate, only the rate that banks borrow at. The rate of borrowing for everyone else in the economy is done further out along the yield curve. And that could be problematic because all of these other pressures suggest that those interest rates have moved higher. Now, what's also fascinating to me is that the administration is talking about a number of steps that others would viewed as economic or market interference. For example, telling banks what credit card rates they should be.

[Tom Keene]

Here we go. She's touching the third rail. Are you teaching?

[Abby Joseph Cohen]

And also the discussion in terms of controls on the mortgage markets. This is something that we've not seen in a very long time.

[Tom Keene]

Abby. Joseph Cohen with us. We continue with Abby. Joseph Cohen, Columbia Business. Can you see her with a piece of chalk in her hand talking about dropping credit card rates from 29% down to 10%?

[Host]

See what the Columbia students think.

[Tom Keene]

Paul Sweeney, would that be Joseph Cohen?

[Host]

Abby, what will you be listening for today from Fed Chairman Jay Powell? This will be his last appearance here. What will you be listening for?

[Abby Joseph Cohen]

Because like everyone else, I'll be looking at the statement which is issued and also obviously in the press conference, I don't expect him to directly address the issues having to do with the allegations that have been made.

[Tom Keene]

Look, Abby, at the state of the market. We began with a historical perspective in this moment, this morning of 7000 right now. 7000, excuse me, 6995 and SP X. There's an entire industry which is basically saying to Americans, we know you're afraid you have to be in the equity markets. Let us give you some form of hedged return where we give away a larger capital gain. Is that a sound investment approach or does Abby Joseph Cohen just say buy the next marginal share of in video.

[Abby Joseph Cohen]

I when I advise individual investors, endowments, others, I'm always taking the intermediate to longer term view. I'm not looking at short term decision making. And so from that standpoint, Tom, as you know, I have been an enthusiast for the US Economy. I think that the United States economy will continue to grow. There will always be hiccups. I am concerned about some of the policy decisions that have been taken. Right now I am concerned about the dollar. But I also know when we apply our CFA tools in terms of relative valuations and so on, there are some opportunities now outside the United States. Last year I spoke about the Japanese market, the South Korean market, and to that this year I would add the Indian market. India has had a hard time getting its stock market moving on any sustainable basis, but the companies underlying the major indices in India performing quite well right now.

[Tom Keene]

We got to leave it there. Abby Joseph Cohen thank you so much. And I was rude. I said, you know, she slipped out of Cornell High above Cayuga's wall.

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Sure, yeah.

[Tom Keene]

With a Dow at a thousand. But I was wrong. It was, it was like 20,500. Okay. When she came out of Cornell a few years ago.

[Abby Joseph Cohen]

Yeah. And down. Because it was icy and cold just like it is in New York.

[Tom Keene]

The walk up the slopes enough to kill you. Abby Joseph Cohen forever from Ithaca, Goldman Sachs and Columbia Business School.

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