Global Financial Insights with Michael Ashley Schulman: Fed Policy, Energy Costs, Tariffs, and Eurozone Shifts

Author(s): Scott Douglas Jacobsen

Publication (Outlet/Website): A Further Inquiry

Publication Date (yyyy/mm/dd): 2025/06/06

Michael Ashley Schulman, CFA, Chief Investment Officer of Running Point Capital Advisors, offers expert insight into current global financial dynamics. He discusses Federal Reserve rate policy, the political role of Jerome Powell, and how tariff measures and OPEC oil decisions interact to shape inflation. Schulman emphasizes the deflationary nature of taxes and energy’s foundational role in economic systems. He also explores Ukraine’s shift toward euro-based monetary alignment and the EU’s planned capital reallocations toward defence. The conversation weaves macroeconomics with political strategy, emphasizing adaptive policy analysis and real-world market implications.

Scott Douglas Jacobsen: Today, we are here for the first session with Michael Ashley Schulman, CFA, to discuss global finance. Schulman is the Chief Investment Officer and a founding partner of Running Point Capital Advisors, a multifamily office based in El Segundo, California.

With over twenty years of experience, he leads the firm’s global macroeconomic outlook, investment strategies, asset allocation, and management of private placement life insurance (PPLI) and private placement variable annuities (PPVA). Schulman specializes in alternative investments, impact assessments, and tax-efficient structures. He previously held senior roles at Hollencrest Capital Management and Deutsche Bank. He earned a BA in Economics from the University of California, Berkeley, and an MBA from the MIT Sloan School of Management. He is also a CFA charterholder, board advisor, writer, art enthusiast, and advocate for social impact investing. The Federal Reserve has held interest rates steady. Why do you think that is? Is that a good or bad thing?

Schulman: It is a good thing. They have held steady because there is no strong catalyst for a change. The economy is not overheating to the point where the Fed needs to raise rates, but it is also not weak enough to require stimulus through rate cuts.

The Federal Reserve’s dual mandate focuses on maximum employment and price stability. Inflation remains above the Fed’s target of 2%, so lowering rates could risk reigniting price pressures. At the same time, unemployment is relatively low, around 4.2%, according to the latest data, which indicates a healthy labour market.

Thus, Chair Jerome Powell and the Federal Open Market Committee (FOMC) are taking a prudent approach: holding rates steady and staying data-dependent, waiting to see how the economy responds.

There is speculation that the Fed may cut rates by the end of 2025, possibly in December, depending on inflation trends and labour market’s evolution. That remains to be seen and will be entirely data-driven.

Many market participants hope for rate cuts to support equity markets, real estate, and consumer credit. But we are now in May 2025, and Powell’s term as Fed Chair ends in May 2026, so decisions made this year will likely shape the legacy of his tenure.

I believe that Trump will not get rid of Powell in the next year because, technically, he cannot.

During this adjustment phase—early in Trump’s renewed presidency—our assessment indicates the President could tactically leverage Powell’s Federal Reserve leadership. The Fed Chair functions as a perfect fall guy: if the economy does well, Trump can take all the credit. If the economy does poorly, he can blame Powell since Powell holds significant economic levers through the Federal Reserve. Robust economic performance allows the administration to justifiably tout policy successes, whereas market declines can be deflected toward central bank interventions. This arrangement proves most advantageous when the White House sustains steady rhetorical challenges against Powell, whose position wields enough institutional power and monetary control to credibly absorb blame during financial setbacks.

In other words: President Trump privately appreciates Jerome Powell as an ideal scapegoat. When economic conditions flourish, Trump can justifiably claim victory, yet during downturns, the Federal Reserve Chairman controls sufficient economic mechanisms to credibly shoulder responsibility. This political theater functions optimally when the administration continuously maintains public verbal pressure on Powell.

A year from now, I expect interest rates on the short end to come down as Trump is sure to replace Powell with someone more dovish, more amenable to lowering Fed rates. I am building that into my mid-term and long-term plans and scenario analyses. We have seen a recent drop in oil, plus shifting tariff measures that vary by country, especially among petro-states. These drops, naturally, have complex economic implications.

Jacobsen: So if we see effects like this—say, one conscious decision regarding tariff policy—are these compounded, or are they distinct and separable economic challenges?

Schulman: I like that question. Let me try to answer it. If I miss the mark, feel free to reevaluate and press me on it.

The main thrust of tariffs was announced on Liberation Day, April 2. Strange coincidence: On the same day, April 2, OPEC, led by Saudi Arabia, opened the oil spigots and lowered oil prices.

Many expect tariffs to be inflationary—a view commonly held by economists. However, fundamentally, tariffs are taxes, and taxes are inherently deflationary. While tariffs may initially push up prices, they force market adjustments—consumers purchase less, seek alternatives, or develop workarounds. Thus, though appearing inflationary in the short-term, tariffs ultimately prove deflationary by extracting purchasing power from the economy.

What is interesting is the timing—more than a coincidence. On the same day, Liberation Day was marked, and those sweeping tariffs were announced—with Trump holding up that big poster board listing them—Saudi Arabia and OPEC opened the spigots, increased oil production, and lowered oil prices. Lower oil prices are deflationary.

That is one of the more consistent economic principles: energy affects the cost of almost everything—production, services, transportation of goods, electricity, computer systems, AI—it is all energy-dependent. Oil and natural gas make up much of that. So lowering energy costs is hugely deflationary and helps counterbalance many fears surrounding tariff-driven inflation.

That move by OPEC was likely done in part—or even largely—because Saudi Arabia wants to remain in favour of Trump and build a good relationship with his administration and with the U.S. more broadly. It was seen as a beneficial counterweight to the inflationary concern. Since then, OPEC has continued to take a dovish stance on oil, leaning toward increased production and lower prices, at least in the near term, until things settle.

Ironically, oil prices are now dropping so low that some U.S. producers may be shelving or delaying expansion plans.

Jacobsen: So, that gives an angle that is a bit less commonly heard—it is educational, in the sense that these macroeconomic moves are not always linear. It is not A to B to C. Sometimes it is A to A2 to B2 to C. So we can get similar effects through different pathways, and must infer the probability of cause even without direct proof by identifying reasonable patterns of decision-making.

Schulman: Yes, that makes sense. And this is one of those cases where it was not just coincidental that Saudi Arabia and OPEC lowered prices and increased supply.

The perception, especially among investors, hedgers, and speculators, of a coming slowdown has also contributed to declining oil prices. Even if not a full-blown recession, slower global growth is still anticipated. Slower growth means lower oil demand, which further translates into lower prices. We are seeing price declines driven by supply increases (OPEC and producers) and demand expectations (market sentiment).

That combination is unusual. Typically, if there is a fear that demand will decline, producers restrict supply—they do not increase it. But people are not abstract, perfectly rational decision-makers. They make seemingly irrational decisions all the time, which also shapes how the economic system plays out.

People make irrational decisions, but there is also something to be said about crowd theory. You know, where you get a thousand people to guess the weight of a cow, and the average guess ends up being surprisingly accurate.

Jacobsen: The wisdom of crowds?

Schulman: Yes, that is the better way of phrasing it—the wisdom of crowds. So yes, sometimes that comes into play too.

Jacobsen: Now, there was a former Colombian customs official, Omar Ambuila. He was sentenced to more than twelve years in prison for accepting over a million dollars in bribes tied to a money laundering conspiracy that involved corrupt U.S. DEA agents. How often does this happen?

Schulman: I do not know how often that happens. Not very. But —this is the kind of thing that feels like something out of a movie.

Jacobsen: U.S. authorities reportedly became suspicious when Ambuila’s daughter showcased an extravagant lifestyle on social media—completely inconsistent with the family’s modest income.

Schulman: That is not too unusual, in the sense that criminals have been caught because of flashy spending, or family members posting online. But when it comes to specifically customs officials, particularly in a cross-border case involving the U.S. and Colombia, it is probably rare, though certainly plausible. It has that cinematic feel, but with real-world consequences.

Jacobsen: Two items out of Europe. First, Ukraine may be considering a move from referencing the U.S. dollar to the euro in its monetary policy. Second, Europe is preparing reforms to absorb redirected global investments, so a significant shift in capital flows and corresponding financial reforms to strengthen its markets. Thoughts or analysis? Two questions, I suppose: (1) Ukraine possibly shifting from the dollar to the euro; and (2) Europe undertaking financial reforms in response to redirected global capital flows.

Schulman: If Ukraine replaces the dollar with the euro, it will likely use it as a reference currency initially. But that really should not come as a surprise. Ukraine has made its intentions clear—they want to join the European Union. And countries that join the EU generally adopt the euro over time.

So, if you think about it in that A-to-B-to-C progression, it makes sense. This move to reference the euro is a logical first step in aligning their monetary system with European institutions. It is a way of saying, “We are on the path to full EU integration.” Aligning their currency reference now helps make that transition smoother down the line and it should not be interpreted as a snub against the U.S. dollar.

To become part of the European Union, you want to walk the walk, talk the talk, and take steps that align with future integration. So Ukraine deepening its financial and regulatory ties with the EU—aligning policy with the euro—tightens that linkage. It makes sense.

They still intend to keep their current currency, at least for now.

That is my understanding. You would know better than I do since you have spent time in Ukraine. But yes, they intend to keep the hryvnia until the actual switch. Aligning it with the euro in the meantime is a sensible preparatory step. And they will probably still keep their reserves diversified across the dollar, euro, and other benchmarks.

Jacobsen: One quick follow-up: You mentioned Europe realigning its financial position—not just individual countries joining the EU. So what about the broader shift in capital flows within the European Union?

Schulman: That is an important point. The big thing for the European Union, in terms of capital flows, is the new self-imposed mandate to increase defence spending. That will be a much larger part of the EU budget in the future.

Yes, initially, they will have to buy some defense equipment and weaponry from the U.S. But over time, they will aim to redirect those capital flows toward building more of that capacity on the continent—within Europe itself. To do that, they will need to finance it, and I doubt they will cut social spending to make room for it.

So we are probably going to see either more deficits, higher taxes, or increased bond issuance—some way to finance the expanded defence spending.

Jacobsen: Michael, thank you very much.

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