Finance and Economics at Milken: Measured Optimism, Greater Dispersion

Finance and economics discussions at this year’s Milken Institute Global Conference reflected a tone of measured optimism. Panelists were broadly constructive on growth and the relative position of the U.S., while treating risks in areas such as private credit as real but manageable rather than systemic.

Beneath that constructive tone, however, were important caveats. Discussions around AI, reindustrialization, debt, geopolitics, labor market disruption, and the continued adjustment to a higher-rate environment all suggested that the next phase of growth may be less uniform than the last.

Key Takeaways

The U.S. was viewed as a relative bright spot. Across Milken discussions, the U.S. was generally viewed more favorably than Europe and Asia, supported in part by its position as a net exporter of oil and by the relative strength of its economy and innovation ecosystem. That relative strength is meaningful, but not absolute. Debt dynamics, geopolitical shocks, and a sharp market drawdown could test consumer spending, particularly if recent strength has been disproportionately supported by wealthy households benefiting from rising stock and home prices.

AI and reindustrialization are widening the gap between leaders and laggards. A recurring theme was that productivity gains from AI appear uneven. Larger or more agile companies seem well positioned to adopt new tools effectively, while smaller or less adaptable businesses may struggle. At the same time, the push to rebuild domestic supply chains is exposing significant skills gaps, particularly in skilled trades, manufacturing, engineering, and related fields.

Private markets are adjusting to a more demanding capital environment. Private credit risks were generally viewed as manageable, with many participants seeing rising defaults as a normalization toward historical levels rather than a systemic threat. Software credit remains one area to watch for further deterioration given the material disruption to the sector from the proliferation of AI coding tools. Private equity may face a more difficult adjustment. Buyout strategies developed over decades of declining rates are now operating in a different environment, with longer holding periods. The private equity playbook continues to evolve against that backdrop and remains an attractive area for investment, particularly for investors adept at manager selection.

What This Means for Clients

The Milken discussions reinforced the importance of selectivity. A constructive macroeconomic backdrop can still produce wide dispersion across companies, sectors, workers, and investment managers. For investors, that means focusing not only on broad exposure, but on where durable advantages may emerge.

AI and reindustrialization may create attractive opportunities, but they also raise practical constraints around labor availability, skilled-trades capacity, supply chains, and implementation. In private markets, the key question is less whether an asset class is broadly attractive and more whether individual managers have the discipline, experience, and flexibility to navigate a higher-rate, lower-liquidity environment.

What We’re Watching

We are watching how quickly AI-driven productivity gains broaden beyond the largest and most agile companies, whether the skilled labor shortage becomes a binding constraint on reindustrialization, how private credit performs as defaults normalize, and whether private equity managers can generate attractive outcomes despite longer hold periods and a more challenging exit environment.

We are also monitoring risks that could challenge the constructive consensus, including  escalation of geopolitical tensions, a sharp reversal in household wealth, and the social and economic effects of AI-driven labor displacement, particularly if gains are concentrated among those best positioned to work with AI.

Closing Perspective

The discussions at Milken supported a balanced view: The U.S. economy continues to demonstrate meaningful strengths, but the next phase is likely to reward selectivity, adaptability, and patience. For clients, the opportunity is not simply to participate in broad growth, but to understand where that growth may be most durable and where risks may be underestimated.