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Highlights from Robert Kaplan’s Recent Presentation at CFA Society of Houston Luncheon

Robert Kaplan, president of the Federal Reserve Bank of Dallas, spoke recently at a lunch sponsored by the CFA Society of Houston. As Director of Investments for Horizon Wealth Advisors, I am a member of the CFA Society of Houston and had the opportunity to attend. At the lunch, Kaplan shared his current thoughts on the national and Texas economies, as well as his expectations for the coming year. Kaplan has been advocating a less aggressive approach by the Fed in their efforts to normalize interest rates. In a recent essay he wrote titled “The Value of Patience,” he stated, “I believe it would be prudent for the Fed to exercise patience and refrain from taking further action on the federal funds rate until the economic outlook becomes somewhat clearer.” We at Horizon Wealth Advisors agree with his perspective and approach.

Please see a detailed summary of Kaplan’s comments at the CFA lunch below:

U.S. Economy
  • Kaplan stated that the economy was strong in 2018, with GDP growth of ~3%.
  • However, effects of fiscal and monetary stimulus are beginning to wane.
  • He expects GDP growth of ~2%, with multiple risks that could negatively impact growth.
  • He noted that leading up to the fourth quarter, there were several signs that the economy was going off course.
  • Global economic growth began to slow
  • Credit spreads widened
  • Interest rate sensitive areas of the economy, such as housing, began to slow
  • Semiconductor business decelerated (he mentioned this as a reliable early indicator)
  • Many companies beginning to issue warnings about their outlook
  • Kaplan thinks we’ve seen peak employment for this economic cycle. He mentioned that employment is a lagging economic indicator.
  • He has been advocating that the Fed take a “wait and see” approach to further interest rate increases.
  • He does not think “runaway” inflation is a risk. He thinks that improving technology is a powerful counter-balance to the normal cyclical causes of inflation.
  • He identified four “structural issues” that he thinks will present challenges over the next few years:
  • Aging population, which will shrink the workforce
  • Sluggish productivity growth
  • Globalization, which could present a significant opportunity
  • Increasing government debt
Texas Economy
  • Kaplan expects continued strength the Texas economy.
  • He said that Texas’s population is growing very fast, mostly from people moving here from other parts of the country.
  • He noted that the energy sector has been a headwind for the past few years, he expects it will turn into a tailwind this year.
  • He mentioned that Texas is the largest state for exports, a trend that should continue (and that a trade resolution will help).
Yield Curve / Fed Policy
  • Kaplan thinks the Fed will slow their activity and will be very clear in communicating their intentions.
  • He joked that there is no “playbook” for how the Fed should proceed from here.
  • He thinks the Fed has had some impact on the shape of the yield curve, but that economic factors still have the greatest influence.

Thank you very much for your continued confidence in our service and advice. If you would like to discuss our opinions, outlook, or your portfolio in greater detail, we would be happy to schedule a meeting or a conference call at your convenience.


Horizon Wealth Advisors is a Houston based fee-only wealth management firm. Horizon is a fiduciary advisor. We specialize in helping successful individuals and families understand, organize, and manage their often complex financial situations. Horizon offers integrated financial planning and investment management services.

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Owen Murray, CFA
Owen Murray, CFA
Owen Murray joined Horizon Advisors in 2005. As a core member of the wealth management team, Owen is principally involved in investment research and portfolio construction.

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