Yahoo Finance Live checks in with Stifel Financial CEO Ron Kruszewski (SF) at the World Economic Forum in Davos, Switzerland to discuss his outlook for the US economy and the potential for a Federal Reserve pivot. While some investors expect rate cuts as soon as March, Kruszewski believes, "the Fed will cut less than the market thinks and not as soon as the market thinks."
With inflation still a paramount concern, he believes the Fed won't suddenly declare "‘we’ve solved the problem’" after one lower inflation release. Though recent data has some optimistic the US will see a soft landing, Kruszewski cautions "there's so many variables we don't know" - especially given that global geopolitical events could upend stability.
Case in point, he flags concerns about fraying economic partnerships like the Bretton Woods trade system. If coordination unravels and countries "throw sand in the gears", it may impact prices and trade, reversing promising inflation progress, he explains.
While "everything is set up" for steady growth on paper, Kruszewski notes too much doubt persists whether from Fed missteps or external shocks.
It's all part of Yahoo Finance's exclusive coverage from the World Economic Forum in Davos, Switzerland, where our team will speak to top decision-makers as well as preeminent leaders in business, finance, and politics about the world’s most pressing issues and priorities for the coming year.
Watch this full episode of Yahoo Finance Live here.
Editor's note: This article was written by Angel Smith
Video Transcript
[MUSIC PLAYING]
BRIAN SOZZI: All right welcome back to "Yahoo Finance's Live" coverage here at Davos, Switzerland at the World Economic Forum. Lots of focus on potential economic soft landing. The director-- direction of rates and markets, you name it. We have a very great guest to talk about all of those things. Stifel CEO Ron Kurczewski. Ron, it's been a while. Good to see you in person.
RON KURCZEWSKI: It has been a while.
BRIAN SOZZI: Is this your first Davos with the CEO of Stifel? What-- 27 years.
RON KURCZEWSKI: Twenty-seven years. I finally, made it to Davos. What do you think? Look at this. I'm coming back.
BRIAN SOZZI: It's nice. All right. Well, good to see you here. And give us your sense on how fast the Fed, when you think, will move in terms of cutting rates? We can't get a real great answer. Some people say, we might get four rate cuts this year. Some are in the six camp. How do you see it?
RON KURCZEWSKI: I think I'm probably on the-- I am that the Fed will cut less than the market thinks. Not as soon as the market thinks. So you will have me back on in March, and say, hey, you were dead wrong. But we see it that they'll cut toward the end of the year. And the reason why is because the economy is doing well. Earnings are going up. The definition of a soft landing would be that the Fed could cut while the economy is strong. But the reason I tapped those expectations down a little bit is that the Fed really was concerned about inflation. Witness the 500 basis point increase. It was every other month. They're raising rates.
And I don't see the Fed just saying, oh, we solved the problem by March. I don't. Now, again, I could be wrong, but I think not. So we'll see.
JULIE HYMAN: But it sounds like you are optimistic about a soft landing at the same time.
RON KURCZEWSKI: I am. And not to make anyone feel depressed or anything, but out of every hard landing starts with a soft landing. So you can think about that. And the answer is that, yes, everything is set up. But there are so many variables that we don't know. And mostly, geopolitical, that can unveil the best laid plans of mice and men.
BRIAN SOZZI: Why did you feel the need to be at this Davos after 27 years?
RON KURCZEWSKI: I wanted to come. This is interesting in Davos. It's phenomenal all the events. But it's also, the epicenter of globalization. And if anything that we're facing in the world today, it's the unraveling potentially of Bretton Woods. And the deal with the United States-- we will protect the world-- will open up markets. And I was interested to see how that would play here. And while it's not number one on the agenda concerns in every meeting I've been in, that's what people are talking about is, what happens in the South China Sea? What happens with Putin? What happens with the United States in an era where we've had 80 years of relatively calm geopolitical?
You have your regional skirmishes. But I would say that that's interesting. And that was what I was here to see. What were they going to say?
BRIAN SOZZI: What does it mean if the US becomes more isolated? Should there be a change in the administration? What does it mean to markets?
RON KURCZEWSKI: Well, again, we've had 80 years of cooperation amongst the countries that are part of Bretton Woods, that agreement. But if you think about it, if you start throwing sand in the gears, which is what would happen protectionism, tariffs, these are all things that are going against that. And to me, it'll impact prices. All right. It won't be as easy to have container ships just in time going through the Suez Canal or the Panama Canal as efficiently as they have.
If we change the fabric, which was the United States protect the seas and you trade with me fairly. that's-- But, again, you're supposed to think big here at Davos. And that's what's being talked about.
JULIE HYMAN: Yeah. So when you say that geopolitics is the thing that maybe could unravel the markets this year, what do you think is the riskiest of the-- there's a lot, unfortunately, to choose from right now.
Is it the US election? Is it the wars that we're seeing, which haven't seemed to derail the markets yet? What do you think?
JULIE HYMAN: Well, If I knew, I wouldn't be sitting here. OK. I would be doing that. It's always something you don't expect that would do it. So I don't want to try to predict. But, for example, something that really impacts oil-- so an oil shock would be something that's not in the markets.
Also, outside of geopolitical again, I'm not so sure that inflation is completely tamed and you have no rate decreases that the markets aren't expecting that. But, generally, speaking, I'm optimistic about '24.
BRIAN SOZZI: We have a lot of new people coming into the Yahoo Finance system. A lot of next generation investors. This is their first time interacting with you. How do you become the CEO of a big bank that's not a Wall Street for 27 years? Clearly, you have some secret that you can share.
RON KURCZEWSKI: Well, you start when it's a small bank. OK. So when I took the job, no one else would take it. And I always tell the story. There were four candidates for the job, including me the other three turned it down.
So I was able to get the job but, Steve has grown from $100 million in revenue to $4.5 billion. And what I would say is that all the young people that are watching this, you can become the CEO of any company, if you so put your mind to it. I'm very encouraged, especially the young people in our firm that are learning, especially with AI and all of that. That is such an opportunity for people-- to young people to learn to be more productive than I ever was.
