Why Will Interest Rates Stay Higher?

Jenny Johnson thinks inflation is probably pretty sticky and rates are probably going to stay higher, after setting aside noise around AI, hyperscalers, circular financing, and revenue recognition. The current rate level is not unusual from a historical standpoint. It is unusual for the last 25 years, but in longer history it is not unusual. Mortgages used to be much more expensive, and the economy still functioned. The rate environment is definitely higher, so a business model with a lot of leverage is a concern. For a good cash flowing company, the consumer is still very strong, particularly in the US.

Productivity is up, at 2%. She does not think any of the productivity story has anything to do with AI. Digitization and cloud servicing, technologies that have been around for a couple of decades, are what the productivity story comes from.

New technology takes a long time to be adopted in an organization. At Franklin Templeton, where she ran technology, people will say the challenge is integration of systems. The first challenge is the quality of data being organized. The second is change management, because people do not like to change.