A Global Macroeconomic and Market Outlook | Ronald Temple, Chief Market Strategist, Lazard| September 15, 2025“I think what you're going to see over the next year is the Fed will be cutting rates. But it's not a slam dunk. It's not a clear-cut case that the Fed should be hitting the alarm bells about unemployment.”“A Global Macroeconomic and Market Outlook” Ronald Temple, Chief Market Strategist for Lazard’s Financial Advisory and Asset Management businesses, talks inflation, tariffs, and labor supply - and their impact on GDP - together with the latest developments in Europe, China, and Japan, and where the U.S. fits in going forward, before a September 15, 2025 meeting of The Economic Club of Florida. Show notesMr. Temple took the Club on a world tour of geopolitical issues covering the Eurozone, China, Japan, and the United States. He discussed two areas of concern – inflation and tariffs – and focused on three primary themes:
“US growth rates are likely to slow in the years ahead,” he said. “If we go back in 2023 and 2024, real GDP growth in the United States was 2.8 to 2.9% each year. That's well above what most economists would say is a sustainable growth rate.” He predicted U.S. growth will slow to 1.5%, while sustainable growth is 1.7-2%. He predicted European growth to narrow the gap by increasing to about 1.2%.
“What you're going to see is higher inflation in the United States this year and next because of our trade policies and the tariffs. This is a short-term issue, because tariffs, once you raise the price, you don't get another increase the next year. This would be a one-year inflation divergence.”
Mr. Temple said that in the last 15 years, U.S. equities have gone up 10-11% a year, Euro and Japanese stocks up by 2-3%, and emerging markets about 2%. “I think the U.S. will continue to outperform non-U.S. countries, but the gap between us is likely to narrow, and we're likely to see improving economic conditions in some of the non-U.S. countries that are finally being forced to reform their economies and try to improve productivity.” Mr. Temple pointed out that most U.S. consumer spending is on services – housing, shelter, doctors, financial advisors, lawyers, etc. Only about 24% is on physical goods. He said that while U.S. job creation is basically at full employment, the year-to-date job creation is the slowest since 2010. This year, there is a significant decline in the number of people who were born in another country, so there are fewer people in the workplace. “I think for the Federal Reserve there's a real challenge,” he said. “Inflation is still grinding higher as tariffs work their way through to prices. Unemployment has ticked up a little bit, but job growth is much weaker. And if we look at the number of open jobs in the United States per unemployed person, for the first time in years, we're now below 1.0 − meaning there are more unemployed people than open jobs.” “I think what you're going to see over the next year is the Fed will be cutting rates. But it's not a slam dunk. It's not a clear-cut case that the Fed should be hitting the alarm bells about unemployment, because there's a chance that we will see unemployment at or below four and a half percent by year end, but inflation looking much more worrisome, and it's going to be very hard for economists in the Fed to disentangle what's going on and what's sustainable and whether they should be cutting rates.” Mr. Temple said tariffs are here to stay even if some of the current tariffs are found by the courts to be improper. “There are four other legal codes that the President can use to impose tariffs. We think the tariffs will end up being in place. If the next president is a Democrat, I think the vast majority of these tariffs will stay in place, because the Congressional Budget Office forecast is we're going to raise $300 billion a year of revenue from these tariffs.” He said he believes budget deficits will continue. “I think for the next decade, you're going to have deficits of at least 6% of GDP every year, which continues to be an unprecedented level in peace time without a national emergency.” Mr. Temple told the Club that Europe is at a watershed moment because:
China is in year five of a housing crisis resulting in a massive decline in consumer confidence. Prices are going down and foreign companies are pulling money out. He said that’s a good sign for emerging economies because the money is going there. He said Japan is a unique but dying country. Its population is getting older and shrinking. The country is trying to use robots as replacements, but the country’s topography doesn’t allow for big factories with robot-friendly flat floors. He said that 51% of household assets are in bank deposits and cash, and with prices now increasing by 12%, that wealth is worth less. “You're now seeing Japanese people moving money out of cash and into government bonds, into corporate bonds, into equities, and I think that could lift the Japanese equity market over the years to come,” he said. As for personal investments, he predicts that the current low bond rates will go up. He said the Korean equity market is the best right now and Hong Kong is second best because the Chinese government is allowing money to flow in. “If you're thinking about where to put your money after 15 years of the U.S. absolutely crushing other markets, maybe this is the beginning of something really interesting,” he said. As he predicted, a few days after Mr. Temple’s speech, the Fed lowered interest rates by 25-basis points. (You can also view the entire Club meeting on YouTube.) Links and Resources Mentioned in this Episode
Date of recording 9/15/2025 |