Excess Returns: "Everyone Feared Recession. His Data Said Otherwise | US Bank CIO Eric Freedman on What It Says Now"

Date: October 26, 2025
Guest: Eric Freedman, Chief Investment Officer, US Bank
Hosts: Jack Forehand, Justin Carbonneau, Matt Zeigler

Episode Overview

This episode dives deep into why US Bank's CIO Eric Freedman maintained optimism on the US economy during a period when recession fears were rampant. The conversation centers on using data-driven frameworks, marginal change analysis, and disciplined portfolio construction to navigate complex market environments. Freedman shares his process for filtering “signal from noise," balancing strategic versus tactical allocation, and evaluating risks ranging from inflation to AI hype and market concentration.

Key Discussion Points & Insights

1. Controlling the Controllables: Investment Philosophy

[03:04 – 04:51]

• Philosophy: Focus on what can be controlled—such as consumer behavior and business fundamentals—rather than unpredictable policy swings.

• Framework: Data-driven decision making is paramount, but intuition and experience (“gut feel”) are part of the optimal mix.

  • Quote: “The optimal outcomes across, whether it’s medicine or finance or other disciplines is when you incorporate both intuition… along with data. If we had to choose between the two, we would certainly emphasize data.” — Eric Freedman [03:53]

• Application: Avoids knee-jerk reactions to headline news or policy speculation, instead sticking to robust, testable hypotheses.

2. Optimism & Mosaic Data Analysis: Staying 'Glass Half Full'

[05:51 – 10:16]

• Methodology: Uses both top-down macro data (surveys, government/private releases) and bottom-up micro (company reports, sector trends).

• Marginal Change Focus: Major returns often come not from “good to excellent,” but “bad to OK” or “OK to marginally better.”

  • Quote: “The reality is... It could be that things go from really bad to okay, or go from okay to marginally better. And so those notions of spotting incremental improvement... that’s what really drove us to have that glass half full perspective.” — Eric Freedman [09:14]

• Anecdote: Decision-making is iterative—working hypotheses are revisited as new data emerges.

3. Turning Analysis into Portfolio Action: Strategic vs. Tactical Moves

[11:14 – 15:16]

• Strategic Changes: Go through formal committees, with long-term asset class inclusion (e.g., reinsurance) requiring broad consensus.
• Tactical Changes: Final call sits with the CIO (Freedman), within pre-established boundaries (e.g., shorter-term allocation to gold, energy).
  • Analogy: Strategic vs. tactical allocations likened to "UN Security Council": some assets are permanent, others rotate based on context.

4. Avoiding the Herd: Why US Bank Didn't Go Bearish on the Economy

[15:16 – 22:44]

• Consumer Data Analysis: Avoided generalizing—sliced data by age, income, cohort. Did not see across-the-board deterioration others predicted.

  • Quote: “When we looked at different cohorts... we just weren’t seeing that deterioration that a lot of others who were more bearish were seeing.” — Eric Freedman [15:49]

• Live Scorecards: Tracks consumer “score” out of 10 (most recent: 5/10), monitoring for post-holiday strain or improvement.

  • Quote: “We would get really concerned about the consumer... The weakest we got... was a 4 out of 10... The marginal improvement has actually gone up in the past couple of months.” — Eric Freedman [16:47]

• Use of Real-Time Data: TSA throughput, box office, restaurant data supplement core analysis.

5. Inflation and the Fed: Sticky CPI & Policy Risks

[22:44 – 30:47]

• Inflation Outlook: Predicts inflation remaining sticky at or just above 3%; US may face more persistent inflation than global peers.

  • Quote: “If you look at economist forecasts... headline CPI will still be at 3%, actually a little north of 3%. And that’s very different than the rest of the world.” — Eric Freedman [22:57]

• Fed Dynamics: Current environment is uniquely tough for the Fed, with the dual mandate in conflict.

• Bond Market Analogy: Likens the appetite (or lack thereof) for US Treasuries to choosing cuts at a Brazilian steakhouse; warns US debt may lose its “prime cut” status over time.

  • Quote: “US Government debt has been the choice cut for forever ... that could shift, that could change." — Eric Freedman [29:33]

6. Risks to US Exceptionalism & Role of International Diversification

[30:47 – 38:06]

• Risks: New global alliances, more competition to the US dollar/Treasuries; the US is still “the cleanest dirty shirt,” but that could change with shifting alliances.

  • Quote: “We still get away with being the cleanest dirty shirt in the pile... but there's a lot more competition on an aggregated basis that countries team up more.” — Eric Freedman [31:20]

• Portfolio Construction: Supports international diversification, but maintains purposeful US bias. Looks for greater shareholder friendliness abroad, especially in Japan and selective EMs.

7. Inflation Protection in Portfolios: More Than Just Stocks & Bonds

[38:06 – 41:33]

• Approach: Allocates directly to inflation-protected assets (TIPS, global infrastructure, select real assets); not just commodities or broad futures indices.

  • Quote: “We do think having a bespoke allocation in one’s portfolio that is dedicated to inflation risk is important. And we are not believers that equities in and of themselves are sufficient to protect against inflation.” — Eric Freedman [40:32]

• Favored Sectors: Current preference is global infrastructure due to built-in inflation adjustment and yield.

8. AI & Productivity: Frameworks for Assessing Hype vs. Real Impact

[41:33 – 47:07]

• Three-Phase AI Analysis:

  1. "Do you have an AI strategy?"
  2. "How credible and capitalified is it?"
  3. "What is your return on AI capital employed?"

• Current State: Most firms are between phases 2 and 3; real productivity boosts are emerging in areas with acceptable margins of error, but market may overestimate impact in high-stakes fields.

  • Quote: “There are plenty of examples where the market has over extrapolated the power of AI... where there is no margin of error.” — Eric Freedman [43:56]

• Comparison with Internet Bubble: Cautions against early overvaluation—echoes dot-com era lessons.

9. S&P Concentration & Market Valuations

[47:07 – 55:47]

• Mag 7 Dominance: Concentration is a concern, especially if high performance persists without wider tech value diffusion.

• Valuations View: Current valuations are “higher side of fair.” Most upside may already be “pulled forward” from future returns.

  • Quote: “Valuation is never a catalyst, but part of it is a combination of valuation plus some marginal improvement.” — Eric Freedman [53:13]

• Tactical Flexibility: Non-US equities currently favored. Valuation metrics (like CAPE) used with caution; focus on corroborating prices with earnings and sentiment.

10. Advice for Individual Investors

[56:01 – 58:34]

• Have a Plan, Stick to It: Consistency and discipline are crucial, especially during volatile episodes.

  • Quote: “Being able to stick to your discipline on April 9th, 11th and 12th, when... we had a 15% intraday reversal—that’s like two years of returns if you made a bad decision that day.” — Eric Freedman [56:15]

• Emotional Detachment: Execute plans without emotion; empower yourself through ongoing, quality learning.

  • Quote: “We are all drowning in information, but we’re all thirsting for knowledge. And empowerment helps you separate those two variables.” — Eric Freedman [57:52]

Notable Quotes & Memorable Moments

• Marginal Change Philosophy:
  “Oftentimes a more, let's call it, elementary view of investing is, hey, we're looking for things to go from really good to excellent... The reality is that's not really how you drive returns in portfolios. It could be that things go from really bad to okay, or go from okay to marginally better.” — Eric Freedman [00:00, 09:14]

• Consumer Scorecard & Data Vigilance:
  “We scored [consumer health] from 0 being weakest, 10 being strongest. The weakest… was a 4 out of 10… The marginal improvement has actually gone up in the past couple of months.”—Eric Freedman [16:47]

• Fed/Bond Market Analogy:
  “I think about this as a bond market investor, like I'm at a Brazilian steakhouse... The risk… is twofold. Number one, US debt… could shift, that could change.” — Eric Freedman [29:15]

• AI Skepticism:
  “There are plenty of examples where the market has over extrapolated the power of AI in industries and applications where there is no margin of error.” — Eric Freedman [43:56]

• Actionable Advice:
  “Have a plan and stick to it… Be as unemotional in the execution of that plan as… you possibly can be… We are all drowning in information, but we’re all thirsting for knowledge.” — Eric Freedman [56:01, 57:52]

Key Timestamps

• Data vs. Intuition in Decision-Making: 03:04–04:51
• Staying Optimistic via Marginal Change: 05:51–10:16
• Portfolio Process: Strategy to Execution: 11:14–15:16
• Avoiding Recession Herd Mentality: 15:16–19:02
• Consumer Scorecard Explained: 20:47–22:44
• Sticky Inflation & Fed Challenges: 22:44–30:47
• Risks to US Exceptionalism: 30:47–34:20
• International Diversification Rationale: 34:20–38:06
• Inflation Hedging in Portfolios: 38:06–41:33
• AI & Productivity: Where Are We Really?: 41:33–47:07
• S&P Market Concentration & Valuations: 47:07–55:47
• Eric’s Advice for Individual Investors: 56:01–58:34

Summary

Eric Freedman advocates for a disciplined, data-driven, yet flexible approach to investing. By focusing on "controlling the controllables," assessing marginal improvements, and maintaining humility and a working thesis approach, his team navigated a period when consensus called for recession but empirical signals suggested otherwise. From inflation hedging and asset allocation decisions, to the risks and potential of AI, Freedman underscores the importance of sticking to evidence, collaborating across specialties, and never underestimating the value of planning and emotional stability for investors.