Bloomberg Talks: Lisa Shalett Talks Fed Cuts

Date: October 14, 2025
Guest: Lisa Shalett, Chief Investment Officer, Morgan Stanley Investment Management
Host(s): Bloomberg podcast team

Episode Overview

In this episode, Lisa Shalett joins Bloomberg’s hosts for a timely discussion on market dynamics, with a particular focus on the extraordinary performance of gold, the relationship between asset classes, AI-driven market froth, sector rotations, and the impacts of dollar movements. Shalett elaborates on current market anomalies, offers insight into how Morgan Stanley is navigating this environment, and frames expectations for the coming year, especially as investors anticipate Fed rate cuts.

Key Discussion Points and Insights

1. Gold’s Unusual Outperformance

[00:23 – 01:51]

• The discussion opens with the surprising surge in gold prices, outpacing equities:
  • Lisa Shalett: “We've really been on this extraordinary run for the past, quite frankly, three years…with gold massively outperforming stocks.” (00:45)
• Shalett proposes possible reasons:
  • Not just concerns about dollar debasement, but wider skepticism about fiat currencies globally.
  • The rise of stablecoins and crypto ecosystems may be prompting some players to use gold as collateral, suggesting institutional reserve building in gold.

2. Correlations Breaking Down Across Markets

[01:51 – 02:44]

• Traditional market relationships are shifting:
  • “All of these correlations are breaking down. …Perhaps we're really starting to see inflation in financial assets, just too much liquidity…sloshing around, looking for places to go.” (Lisa Shalett, 02:04)
• The “everything rally,” with capital flowing into gold, stocks, bonds, and currencies, indicating potential froth.

3. The AI Boom and Market Frothiness

[02:44 – 04:37]

• The hosts flag the AI-driven surge in equities and question whether some recent venture structures are becoming opaque and circular.
• Lisa Shalett: “The deal making and interconnectedness of all of it is starting to suggest to us that we're getting to that part of the cycle where…the analysts start making up new terms…It harkens back to the eyeballs and…the words we made up during the peak of the Internet.” (03:23)
• Shalett calls for transparency from companies, urging that market participants be able to distinguish clearly between real gains and speculative promises.

4. Timeline for Proving Value in AI and Tech

[04:37 – 05:39]

• On how long the market will tolerate froth before demanding tangible results:
  • Lisa Shalett: “What we've talked about is…how critical 2026 is and probably the second half of 2026…we're getting to that point of exhaustion and earnings need to come through…by next summer people are going to start saying hey, show me the money.” (04:53)
• Multiple expansion may be exhausted, shifting the focus to productivity and real earnings.

5. Sector Preferences Amid Uncertainty

[05:39 – 06:31]

• Hosts ask where Morgan Stanley sees current value.
• Lisa Shalett: “Our favorite sector for the last 18 months has been financials…They obviously will have the tailwind of likely a steeper yield curve next year…deregulation…So I think that’s kind of an ideal environment for them.” (05:46)
• Financials are expected to benefit from margin-expanding AI implementation.

6. Impacts of Dollar Weakness

[06:31 – 07:34]

• On how recent dollar movements are reshaping strategy:
  • Lisa Shalett: “We've had a view that inflation is going to be sticky…a weaker dollar actually inhibits our ability to effectively price imports. And when you multiply that by tariffs, it’s an even bigger headwind.” (06:52)
• While earnings are helped by a weaker dollar for multinationals, import pricing and inflation could degrade.

Notable Quotes & Memorable Moments

• “We've really been on this extraordinary run…since the bull market began in the fall of 2022 with gold massively outperforming stocks.” (Lisa Shalett, 00:45)
• “All of these correlations are breaking down…We're seeing, you know, folks buy, you know, everything from, from gold to stocks to bonds to currencies.” (Lisa Shalett, 02:04)
• “As these deals are rolled out…the companies are making the effort to really help us map what is real, what is on the calm and what is…a promise that could vaporize.” (Lisa Shalett, 03:23)
• “By next summer people are going to start saying hey, show me the money.” (Lisa Shalett, 04:53)
• “Financials should be a place where we start to see stories at least of gen implementation, driving margin expansion.” (Lisa Shalett, 05:46)
• “A weaker dollar actually inhibits our ability to effectively price imports…It's actually an even bigger headwind.” (Lisa Shalett, 06:52)

Timestamps for Important Segments

• 00:45 – Gold’s extraordinary performance and possible crypto-reserve drivers
• 02:04 – Breakdown of market relationships and “everything rally”
• 03:23 – AI boom, deal-making froth, and analogies to the dotcom era
• 04:53 – Timeline for earnings accountability and skepticism about future growth
• 05:46 – Financials as a favored sector, rationale and forward-looking views
• 06:52 – Dollar weakness, inflation stickiness, and implications for global trade

Tone and Style

Lisa Shalett speaks with clarity, skepticism about easy narratives, and a focus on fundamentals, urging transparency and accountability. The discussion is analytical but accessible, laced with allusions to past market bubbles and cautious optimism about specific sectors amid wide uncertainty.

Summary Takeaway

The episode delivers a nuanced look into the current financial landscape: Gold’s rally, frothy AI-driven markets reminiscent of dotcom exuberance, and the importance of 2026 as a proving ground for the market’s hype cycle. Shalett emphasizes focus on fundamentals—especially in financials—and warns of persistent inflation risks tied to the weakening dollar. Investors, she suggests, should stay alert for signs of real productivity gains and remain skeptical of hype until clear evidence emerges.