August 27, 2025 • 11 mins
The dollar fell and longer-dated Treasury yields rose as President Donald Trump’s push to remove Federal Reserve Governor Lisa Cook fueled concern about central bank independence and inflation risks. Stocks eked out gains before Nvidia Corp.’s results.
While the moves were modest in listless summer trading, they underscored growing unease over political interference in monetary policy. That could give Trump another chance to name someone to the Fed board as he repeatedly pressures officials to cut rates.
Ben Inker, Co-Head of Asset Allocation and Portfolio Manager at GMO, breaks down the market risks facing US investors and White House's legal battle with the Fed escalates. Ben speaks with Tim Stenovec and Isabelle Lee on Bloomberg Businessweek Daily.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:08):
You're listening to Bloomberg Business Week with Carol Masser and
Tim Stenoveek on Bloomberg Radio.
Speaker 3 (00:15):
Well, the dollar fell, long dated bond yields rose, and
stocks wavered as President Trump's push to remove FED Governor
Lisa Cook fueld, concerns about central make independence and inflation risks.
It's not just that, though, it's also in Vidia Tomorrow.
We've been saying there's a lot riding on that report.
It's the world's biggest stock. It makes up three percent
of the global market cap of all public companies. Will
(00:37):
bring those numbers to you as soon as they cross tomorrow.
This is the backdrop for our conversation with Ben Inker.
He's the co head of Asset Allocation Portfolio Manager at GMO.
It's the Boston based asset manager co founded by Jammy Grantham,
with seventy billion dollars in assets under management. Ben looks
closely at megacap concentration, so yeah, in Nvidia certainly on
(00:58):
his radar. He joins us from Boston. Ben, we're going
to talk about the mag seven in the US and
the context of the rest of the world. But First,
the threat of FED independence. What we were just talking
about with Endo Current who covers the global economy, the
President saying he will fire FED Governor Lisa Cook if
he is successful. Does it change your view of US markets?
Speaker 2 (01:20):
It probably doesn't change my view all that much because
we're pretty skeptical of at least the US stock market
these days. It would have It would create some more
concerns for US about US bonds and create more concern
about the US dollar because I think if the President
(01:41):
is successful in bullying the Federal Reserve into lowering interest
rates more than the economy warrants, the two places that
that comes out are long term bonds and the dollar.
And the dollar, by virtue of being quite over value today,
could fall really quite hard.
Speaker 3 (02:00):
Do the president's attacks on the Federal Reserve confirm your skepticism?
Does it essentially give you evidence that saying, hey, we
are right in our call to be skeptical of US
equities right now.
Speaker 2 (02:12):
Well, we do think it is part of one of
the key problems for US companies right now. The US
stock market is trading at a big premium to the
rest of the world. That is an issue. The US
dollar is very overvalued. That is an issue. But the
other thing we really worry about for the US is
the US is facing a series of supply shocks that
(02:33):
the rest of the world is not. So we've got
the tariffs, which increase inflation and decrease economic activity. We've
got the move against immigrants, which tends to do the same,
and then we've got this uncertainty problem where we have
an administration that makes its decisions apparently by tweet, and
(02:55):
where you really don't know week to week what is
going to happen, and that makes it very difficult for
USA businesses to make good long term investment decisions. This
is part and parcel of that problem. So while I
certainly hope the administration does not succeed in pushing a
Thud governor off of the board on the basis of
(03:18):
a criminal referral, because you can have a criminal referral
on just about anyone for just about no reason at all,
So I hope it doesn't happen. If it does, it's
another sign of policy uncertainty in a country that is
suddenly a wash in it.
Speaker 1 (03:35):
And we know that you are a skeptic of US
equities because of their high valuations, but the Magnificent Six
dominate US equity performance. What breaks their momentum and what
will you replace them with if they falter?
Speaker 2 (03:47):
Yeah, I mean to be clear, we are quite skeptical
of the fact that the average US company trades at
a big premium to the average company in the rest
of the world. The Magnificent Six, which is the Magnificent
seven x Tesla, because Tesla is not only a very
different company, it's also a much much more expensive company
than the rest. The Magnificent Six have been extraordinary in
(04:09):
their ability to continue to grow at a scale where
other companies in the past have really hit limits to growth.
Now they're trading around thirty times earnings on average. That
Lord knows, that's not cheap. If they can maintain their
past levels of growth, it's still a perfectly reasonable valuation
(04:30):
for them. The question is can they maintain it. We're
not honestly sure. One of the things that is very
different from the past is they have hugely ramped up
their aggregate capex. These were always very capital life businesses,
had wonderful free cash flow, and today they are investing
in aggregate hundreds of billions of dollars in property, plant,
(04:54):
and equipment, and it's a huge bet that they are
going to be able to make a lot of money
out of AI. Will that come true, I don't know
If it does not. It is one of the most
you know, economically meaningful bets we've ever seen from the
stock market and could be a real problem for them.
Speaker 1 (05:14):
Why do you think US premium has persisted despite stronger
growth overseas?
Speaker 2 (05:20):
You know, it's it's funny. I think some of it
is the reflected the reflected glow of the MAG six.
Because of the MAG six, the aggregate S and P
has done better fundamentally right now, That fundamental out performance
is a piece of it. The dollar has been a
big source of the outperformance because the dollar has appreciated
(05:41):
by a lot over the last decade versus every other
currency on the planet. And then the valuation in the
US over the last decade has really expanded relative to
the rest of the world. But there is this base
of sort of fundamental outperformance, all of which is owed
to the MAG six. So the Magi have been amazing
(06:02):
over the last decade. They're expensive, but they're amazing. The
rest of the US has not been amazing, but has
still captured some of the glow because they've been more
associated with the MAG six than companies outside the US,
(06:22):
and that I just don't see how it's sustainable because
those companies are going to have to do a lot
better than they have in the past to justify their valuations.
Speaker 3 (06:32):
We're speaking with a Ben Ankor, co head of Acid
Allocation portfolio manager at GMO. Of course, the co founded
firm by Jammy Grantham seventy billion dollars in assets under management,
been on the valuation side when it comes to the
MAG six. I know you've talked about US stocks being
(06:52):
more highly valued than international stocks, and if we look
at stocks in the US, obviously that's based on where
investors think they're going to go. You said it could
be justified if they continue their growth rate as the
way they've been growing in recent years. What would you say, though,
to someone who says, well, the US is a unique
environment from a regulatory perspective, from an economic power perspective,
(07:16):
from an international relations perspective, and there is this premium
in the US because well, we have a regulatory environment
that allows for that. That essentially says, okay, well that
is justified that the rest of the world doesn't have,
and indeed, we haven't seen outperformance of the rest of
the world save for the first few months of this year.
(07:38):
We'll see what the future brings. But isn't the doesn't
the US deserve to have a premium on it based
on those factors.
Speaker 2 (07:46):
Look, if the US deserves to have a premium, it
would be on the basis of having a higher return
on capital than we have in the rest of the world.
There are plenty of countries where there are not a
lot of regulations over what companies do. Most of the
emerging world doesn't have that much any regulations. The return
on capital isn't necessarily that brilliant. They aren't wonderful places
to operate. The US has been a good place for
(08:09):
businesses to operate. One we are a very big market. Two,
we have had a regulatory system that is very rules based,
very kind of slow to change, And it has been
a good base to try to sell to the rest
of the world. All of that is under threat right now.
The US is not such a brilliant place to be
(08:31):
as a base for the rest of the world because
things like steel and aluminum costs a lot more in
the US than they do anywhere else on earth, because
we have the big the big tariffs on them. From
a regulatory perspective, while the biggest you know, the biggest
victims might be companies providing wind power or looking to
(08:54):
do so. We today operate in a world where the
regulatory environment is much less predictable, and unfortunately, we also
now operate in an environment where it is pretty clear
that the way you want to get ahead, at least
as a very large cap company, is getting in the
good graces of the government, which is a very different
(09:16):
game than we have had for the last eighty years
in the US, and that you know, that pushes towards
rent seeking behavior, it pushes towards corrupt behavior. It is
not a situation where you would say, aha, these are
the companies that should be training in a premium for
the rest of the world. That is more like what
(09:37):
we have seen in countries like Russia or China, where
in general people have said, oh, well, if you're going
to invest there, you better have a discount to make
up for the fact that you don't know what the
government is going to do. And the incentives for companies
are not necessarily profit maximizing for shareholders.
Speaker 3 (09:56):
You know, speaking of Washington, and we're going to have
more questions on this. The President is having a cabinet
meeting right now. We're monitoring it. If he does start
to take questions, we will bring you those questions and
answers as soon as we get them. Check out live
go on the Bloomberg terminal to see that right now.
Then on that the idea of the US government taking
(10:18):
a stake in these companies, as you mentioned, it does
concern you. We did hear from Howard Lutnik earlier on
CNBC who said the idea of taking a stake in
a defense company such as Lockheed Martin for example, could
be talked about at a certain point in the future.
What's the warning that you have for US involvement US
government involvement in private enterprise.
Speaker 2 (10:40):
Well, you know, the basic problem is as the government
gets more involved in private enterprise, the needs of shareholders
take a back seat. And that isn't obviously, you know,
that isn't necessarily the absolute worst thing in the world.
But we do see, and we have seen time and
(11:00):
time again, where businesses are more answerable to the government
than they are to their standard owners. You get less
good business decisions. Now. On the other hand, if you
are a defense contractor, it may well be in your
interest to have the government take a stake, because if
you are one where the government has not taken a stake,
(11:22):
maybe you're less likely to win the next competition.
Speaker 3 (11:25):
Ben, speaking of the President, we got to leave it there.
Ben Inker, co head of Acid Allocation portfolio manager at
GMO
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:08):
You're listening to Bloomberg Business Week with Carol Masser and
Tim Stenoveek on Bloomberg Radio.
Speaker 3 (00:15):
Well, the dollar fell, long dated bond yields rose, and
stocks wavered as President Trump's push to remove FED Governor
Lisa Cook fueld, concerns about central make independence and inflation risks.
It's not just that, though, it's also in Vidia Tomorrow.
We've been saying there's a lot riding on that report.
It's the world's biggest stock. It makes up three percent
of the global market cap of all public companies. Will
(00:37):
bring those numbers to you as soon as they cross tomorrow.
This is the backdrop for our conversation with Ben Inker.
He's the co head of Asset Allocation Portfolio Manager at GMO.
It's the Boston based asset manager co founded by Jammy Grantham,
with seventy billion dollars in assets under management. Ben looks
closely at megacap concentration, so yeah, in Nvidia certainly on
(00:58):
his radar. He joins us from Boston. Ben, we're going
to talk about the mag seven in the US and
the context of the rest of the world. But First,
the threat of FED independence. What we were just talking
about with Endo Current who covers the global economy, the
President saying he will fire FED Governor Lisa Cook if
he is successful. Does it change your view of US markets?
Speaker 2 (01:20):
It probably doesn't change my view all that much because
we're pretty skeptical of at least the US stock market
these days. It would have It would create some more
concerns for US about US bonds and create more concern
about the US dollar because I think if the President
(01:41):
is successful in bullying the Federal Reserve into lowering interest
rates more than the economy warrants, the two places that
that comes out are long term bonds and the dollar.
And the dollar, by virtue of being quite over value today,
could fall really quite hard.
Speaker 3 (02:00):
Do the president's attacks on the Federal Reserve confirm your skepticism?
Does it essentially give you evidence that saying, hey, we
are right in our call to be skeptical of US
equities right now.
Speaker 2 (02:12):
Well, we do think it is part of one of
the key problems for US companies right now. The US
stock market is trading at a big premium to the
rest of the world. That is an issue. The US
dollar is very overvalued. That is an issue. But the
other thing we really worry about for the US is
the US is facing a series of supply shocks that
(02:33):
the rest of the world is not. So we've got
the tariffs, which increase inflation and decrease economic activity. We've
got the move against immigrants, which tends to do the same,
and then we've got this uncertainty problem where we have
an administration that makes its decisions apparently by tweet, and
(02:55):
where you really don't know week to week what is
going to happen, and that makes it very difficult for
USA businesses to make good long term investment decisions. This
is part and parcel of that problem. So while I
certainly hope the administration does not succeed in pushing a
Thud governor off of the board on the basis of
(03:18):
a criminal referral, because you can have a criminal referral
on just about anyone for just about no reason at all,
So I hope it doesn't happen. If it does, it's
another sign of policy uncertainty in a country that is
suddenly a wash in it.
Speaker 1 (03:35):
And we know that you are a skeptic of US
equities because of their high valuations, but the Magnificent Six
dominate US equity performance. What breaks their momentum and what
will you replace them with if they falter?
Speaker 2 (03:47):
Yeah, I mean to be clear, we are quite skeptical
of the fact that the average US company trades at
a big premium to the average company in the rest
of the world. The Magnificent Six, which is the Magnificent
seven x Tesla, because Tesla is not only a very
different company, it's also a much much more expensive company
than the rest. The Magnificent Six have been extraordinary in
(04:09):
their ability to continue to grow at a scale where
other companies in the past have really hit limits to growth.
Now they're trading around thirty times earnings on average. That
Lord knows, that's not cheap. If they can maintain their
past levels of growth, it's still a perfectly reasonable valuation
(04:30):
for them. The question is can they maintain it. We're
not honestly sure. One of the things that is very
different from the past is they have hugely ramped up
their aggregate capex. These were always very capital life businesses,
had wonderful free cash flow, and today they are investing
in aggregate hundreds of billions of dollars in property, plant,
(04:54):
and equipment, and it's a huge bet that they are
going to be able to make a lot of money
out of AI. Will that come true, I don't know
If it does not. It is one of the most
you know, economically meaningful bets we've ever seen from the
stock market and could be a real problem for them.
Speaker 1 (05:14):
Why do you think US premium has persisted despite stronger
growth overseas?
Speaker 2 (05:20):
You know, it's it's funny. I think some of it
is the reflected the reflected glow of the MAG six.
Because of the MAG six, the aggregate S and P
has done better fundamentally right now, That fundamental out performance
is a piece of it. The dollar has been a
big source of the outperformance because the dollar has appreciated
(05:41):
by a lot over the last decade versus every other
currency on the planet. And then the valuation in the
US over the last decade has really expanded relative to
the rest of the world. But there is this base
of sort of fundamental outperformance, all of which is owed
to the MAG six. So the Magi have been amazing
(06:02):
over the last decade. They're expensive, but they're amazing. The
rest of the US has not been amazing, but has
still captured some of the glow because they've been more
associated with the MAG six than companies outside the US,
(06:22):
and that I just don't see how it's sustainable because
those companies are going to have to do a lot
better than they have in the past to justify their valuations.
Speaker 3 (06:32):
We're speaking with a Ben Ankor, co head of Acid
Allocation portfolio manager at GMO. Of course, the co founded
firm by Jammy Grantham seventy billion dollars in assets under management,
been on the valuation side when it comes to the
MAG six. I know you've talked about US stocks being
(06:52):
more highly valued than international stocks, and if we look
at stocks in the US, obviously that's based on where
investors think they're going to go. You said it could
be justified if they continue their growth rate as the
way they've been growing in recent years. What would you say, though,
to someone who says, well, the US is a unique
environment from a regulatory perspective, from an economic power perspective,
(07:16):
from an international relations perspective, and there is this premium
in the US because well, we have a regulatory environment
that allows for that. That essentially says, okay, well that
is justified that the rest of the world doesn't have,
and indeed, we haven't seen outperformance of the rest of
the world save for the first few months of this year.
(07:38):
We'll see what the future brings. But isn't the doesn't
the US deserve to have a premium on it based
on those factors.
Speaker 2 (07:46):
Look, if the US deserves to have a premium, it
would be on the basis of having a higher return
on capital than we have in the rest of the world.
There are plenty of countries where there are not a
lot of regulations over what companies do. Most of the
emerging world doesn't have that much any regulations. The return
on capital isn't necessarily that brilliant. They aren't wonderful places
to operate. The US has been a good place for
(08:09):
businesses to operate. One we are a very big market. Two,
we have had a regulatory system that is very rules based,
very kind of slow to change, And it has been
a good base to try to sell to the rest
of the world. All of that is under threat right now.
The US is not such a brilliant place to be
(08:31):
as a base for the rest of the world because
things like steel and aluminum costs a lot more in
the US than they do anywhere else on earth, because
we have the big the big tariffs on them. From
a regulatory perspective, while the biggest you know, the biggest
victims might be companies providing wind power or looking to
(08:54):
do so. We today operate in a world where the
regulatory environment is much less predictable, and unfortunately, we also
now operate in an environment where it is pretty clear
that the way you want to get ahead, at least
as a very large cap company, is getting in the
good graces of the government, which is a very different
(09:16):
game than we have had for the last eighty years
in the US, and that you know, that pushes towards
rent seeking behavior, it pushes towards corrupt behavior. It is
not a situation where you would say, aha, these are
the companies that should be training in a premium for
the rest of the world. That is more like what
(09:37):
we have seen in countries like Russia or China, where
in general people have said, oh, well, if you're going
to invest there, you better have a discount to make
up for the fact that you don't know what the
government is going to do. And the incentives for companies
are not necessarily profit maximizing for shareholders.
Speaker 3 (09:56):
You know, speaking of Washington, and we're going to have
more questions on this. The President is having a cabinet
meeting right now. We're monitoring it. If he does start
to take questions, we will bring you those questions and
answers as soon as we get them. Check out live
go on the Bloomberg terminal to see that right now.
Then on that the idea of the US government taking
(10:18):
a stake in these companies, as you mentioned, it does
concern you. We did hear from Howard Lutnik earlier on
CNBC who said the idea of taking a stake in
a defense company such as Lockheed Martin for example, could
be talked about at a certain point in the future.
What's the warning that you have for US involvement US
government involvement in private enterprise.
Speaker 2 (10:40):
Well, you know, the basic problem is as the government
gets more involved in private enterprise, the needs of shareholders
take a back seat. And that isn't obviously, you know,
that isn't necessarily the absolute worst thing in the world.
But we do see, and we have seen time and
(11:00):
time again, where businesses are more answerable to the government
than they are to their standard owners. You get less
good business decisions. Now. On the other hand, if you
are a defense contractor, it may well be in your
interest to have the government take a stake, because if
you are one where the government has not taken a stake,
(11:22):
maybe you're less likely to win the next competition.
Speaker 3 (11:25):
Ben, speaking of the President, we got to leave it there.
Ben Inker, co head of Acid Allocation portfolio manager at
GMO
Hosts And Creators
Tim Stenovec
Carol Massar
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