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

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.

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.

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]

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

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.

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.