The Federal Reserve's recent decision to raise rates 25 basis points is, in my judgment, a clear positive on at least two dimensions.

One, it's a clear vote of confidence on the strength of the economy. We see this in various aspects—high economic growth, AI-driven earnings fundamentals. We see this in higher stock prices and broad, strong revenue and corporate profitability. And so it's a clear vote of confidence.

At the same time, a commitment to address the high and stubborn inflation that we've all experienced, not just this past year, but for the past several years.

And so when you put all those forces together, I think that's what the takeaway is going to be from the Federal Reserve's recent decisions is that even if a few more interest rate hikes could be in store, I see a theme of resilience, both for the financial markets and for the economy at large.

Q: When would rate hikes start to really impact markets?

So the key question is at what point could future monetary policy decisions or rate hikes start to really impact the financial markets. You would need to very likely take short-term interest rates materially higher than the 4% or so that the Federal Reserve recently raised toward. Certainly north of 5% would put you in a territory at least before we would start talking about significant sort of downdraft in earnings potential and economic activity. And that is not our baseline.

And so I think there's a room here where you can have strong economic fundamentals, a tightening Federal Reserve that ultimately brings down inflation, and yet you have the financial markets remain resilient. That is the territory we are in and likely will remain in for the foreseeable next 6 to 12 months.

So it would have to be material further aggressive rate hikes that would be pushed likely by higher inflation, which is not our baseline, and a significant tightening in the labor market the Federal Reserve would have to address before you would start to really materially impact financial conditions.