♪ announcer: from our studios in new york city, this is "charlie rose." charlie: today was a much anticipated meeting between the trump administration and the working press. white house press secretary held his first official briefing this afternoon. he addressed a range of policy issues as well as the new administration's relationship with the press and intelligence community. this comes two days after spicer was widely criticized statement on saturday in which he disparaged media outlets for what he called deliberately false reporting. joining me now is the white house bureau chief for the washington post and a white house reporter for though washington journal.

joining us later is margaret brennan from cbs news and jonathan karl, the chief white house correspondent for abc news. i him pleased to have all of them here. tell me about how it played. guest: there are basically two sean spicers. the one who gave the statement a couple of days ago on saturday was defiant and angry, basically yelling at the press and using falsehoods, telling things that were not true. today, he was much more notable, taking questions and stayed up there for more than an hour, talked fluently about a range of policy matters. when he was asked about the mistruths he had stated about the inauguration crowd size, he effectively apologized. he said i always try to come here with truthful information and i'm going to endeavor to do this in the future and talked about how donald trump is chafing at what he sees as an unfair media narrative out to undermine his presidency.

charlie: damien? damien: we have all dealt with the good cop/bad cop situation as reporters, but it is rare to have it from the same person within three days. i think there was a group exhale from the press. charlie: if in fact things were turned upside down over the weekend, they have been turned back up in terms of at least and understanding the press secretary and the press have a job to do and if you are not truthful with each other, you have something significant to lose? damien: that's exactly right. in journalism school, we learned you never pick a fight that will pull you over the barrel. i think they realized that narrative is going to be -- put facts out there and the media will shoot them down.

so what he tried to do today is answer as many questions as he could, be as conciliatory as he could and try to rebuild a little bit of that trust. that is going to be a work in progress, but that seems to be his strategy. charlie: he did say over and over again that there is an attempt to go after this president and a rush to judgment every time? guest: he talked about president trump watching the television and becoming enraged with what he sees as unfair commentary and a sense of people doubting his ability to forge a consensus, people doubting whether his cabinet nominees will make it through senate confirmation, just feeling like there's always a hurdle and the media is counting him out and trump want s everybody to acknowledge his victory. but it is important to point out that the victory is not that commanding. he won the electoral college, obviously, but he lost the popular vote by nearly 3 million votes to hillary clinton. a majority of the people in this

country disapprove of his performance according to the latest polls and that is a challenge for trump. he wants to claim a mandate and have the authority of a big electoral victory and it's not quite there. charlie: margaret brennan joins us now, my colleague at cbs. what is your impression of what happened today and is everything back on an even keel? margaret: i think this is going to be an ongoing tussle with the press, something donald trump and his campaign have said is their perception, that they somehow believe they are treated unfairly in the trump white house continues to be treated unfairly. that impression still has not been dispelled on their end. but today in the white house press briefing room, sean spicer definitely tried to hit the reset button, tried to hold it like a normal briefing in terms of allowing reporters to ask questions, allowing some reporters to have follow-up questions, and included a broader group.

the new york post got the first question rather than the associated press, which has long been tradition. they are trying to engage a bit more. charlie: a couple of questions have been raised in the past. one is about pool coverage and always allowing it if the president decides to slip away to new york and go do something for dinner. secondly, the question as to where these press conferences will be held. is there any coming to a meeting of the minds on those things? margaret: that seems to be an ongoing negotiation. today, there were small changes, moving around quickly and not allowing a lot of follow-up questions. but allowing more reporters to ask. as for when the next press conference could be, friday we have theresa may, the prime minister of the u.k. coming. we don't know if we are going to get a joint press conference as you often see with another head of state, and if so, where that would be held. a lot of this, we have to give room to run in terms of a new white house setting up and figuring out how they want to

handle things stacking up. figuring that out. but the strong concern among white house reporters is that this public diatribe at times against the press and the media will hurt transparency, particularly in regard to things the white house is actually doing that affect americans. charlie: jonathan karl from abc news joins us. i want you to listen to this exchange and tell me how you approach this and how they responded. here's an exchange between jonathan karl and sean spicer at this aforementioned briefing. here it is. >> is it your intention to always tell the truth from that podium or will you pledge never to knowingly say something that is not factual? >> it is. it is an honor to do this and yes, i believe we have to be honest with the american people. i think sometimes we can disagree with the facts. there are certain things we may not fully understand, but our

intention is never to lie to you. charlie: jonathan karl, do you call that a meeting of the minds? jonathan: it was a really rough start for this white house and for sean spicer in particular when he came out on saturday and held that -- it wasn't really a briefing because he didn't take any questions, but when he came out and basically lambasted the press and accused media organizations of lying about the size of donald trump's inaugural crowd, a relatively trivial issue in light of this historic weekend we have just witnessed. he needed a bit of a reset. on saturday, he did say several things that were wrong. these were not huge facts, but he misstated things like the metro ridership at the president's inauguration compared to obama's. he came in and i thought it was a pretty good reset. i thought that was a pretty good answer and this has been an interesting day. for all the talk of shutting

down the briefing room, there has been a buzz of activity at the white house for the first full weekday for president trump. the white house pool you mentioned, we have been brought in -- the pool has gone into more than half a dozen events, almost everything the president has done, they've been running in and calling at the last minute to bring the cameras in. it has been something else. charlie: let me ask this of all four of you. you are all very good reporters, which means you have good sources within whatever beat you are covering, whatever administration you are covering. do you have the same thing with the trump administration or does the fact that the president feels like the press has been unfair to him, which he has expressed in every forum he has had an opportunity to talk about the press cast any kind of resistance to getting the kinds of sources you need?

jonathan: i will take a first stab at that. i find you can get a hold of the senior advisers. they will talk to you even during moments of warfare. at the candidate trump, president-elect trump and now president trump. they are willing to talk to you, some of them and the biggest challenges so much is directed by trump himself and often with decisions made at the last minute, it is sometimes hard to get the ground truth of what is going on because it can change so quickly with the president himself. but i don't find they shut us out. they do engage the press. damien: i would say one of the more challenging things is that he has built this team that does not have a lot of history together. if we are getting signals from one part of the team, it may not be consistent with the rest of the team.

challenges to present readers with the most accurate, complete package of information. it takes a little more like work on our end to run everything down, but we are more than happy to do it. the challenge is to get used to a team that doesn't have a tremendous amount of history together and figure out who has what agenda and go from there. charlie: where do you think the relationship with the intelligence committee stands today? phil: i don't know that it's great. president trump was at the cia on saturday, with his first visit as president, and he spoke in front of the honor wall that honors so many of the intelligence officers who died in the line of duty. he got loud applause from the assembled intelligence officers but it was a self-selected group. these were people who signed up to see him speak. in the broader intelligence community, there is a great deal of unease and a feeling he used that sacred backdrop to give a political speech to attack the media, to talk about himself.

he talked about defending his intellect and talking about him as a vigorous young man. it was disjointed and not the kind of presentation they are used to seeing at the cia. he has reached out and said i'm 100% behind you guys and i'm going to back you guys more than any intelligence community, but the proof is in the pudding and we will have to see where it goes from here. charlie: what did you learn about policy today? margaret: there's a lot of politics, not a lot of policies being explained just yet. what i did think was interesting in terms of a policy approach was sean spicer saying we are not going to renegotiate any multilateral trade deals with the exception of nafta. the asia-pacific trade deal, we're not going to spice it up and put the trump name and improve the terms, we are out. everything will be one-on-one, country to country. that, strategically, is

interesting on an economic front in terms of u.s. trade and advantages, but it could more strategically complicate policymaking in a way that could as a block, challenge china's dominance, particularly in the asia-pacific region. we have not heard the trump administration articulate how they plan to confront china. you have heard things here as far as rex tillerson's views on the white house views on south china sea and territorial disputes. you've heard candidate trump saying he was going to have almost a trade war with china. that language has not been articulated into a singular view to explain how the united states is going to be positioning itself with arguably its biggest competitor economically and militarily. charlie: what about the intelligence community and who created what understanding about the rift between the

intelligence community and this president? jonathan: we heard from the president that it was all a media creation. it was then president-elect trump that went quite aggressively at the intelligence community and accused them of leaking the dossier that had the unconfirmed reports about his alleged activities in moscow. he was the one that brought up the explosive nazi comparison. i think the trip to the cia, clearly there was controversy over how he handled what he said in front of that wall, but that was very deliberate by president trump, a deliberate move to make his very first trip to an agency to be the central intelligence agency. the whole point of that was the message, i don't want to see a rift here, i want to support the intelligence community. i'm going to rely on the intelligence community. if you talk to the white house,

trump will say there is serious problems with the leadership, clearly with former leader john brennan and with the ni clapper. these are the leaders of the intelligence community, appointed by barack obama. he's going to have his only her -- his own leadership in place and i think there will be some mistrust, but the message from this white house is i may have had problems with your leaders, i didn't have problems with you. charlie: thank you so much. we will be right back and talk to bob gates. stay with us. ♪

♪ charlie: robert gates is here. he has had a long and distinguished career in national security over the past five decades. he is served eight presidents as secretary of defense and director of the central intelligence agency. the paperback version of his book on leadership came out last week. it is called "a passion for leadership, lessons on change and reform from 50 years of public service." i'm pleased to have him back at this table. we have much to talk about. [laughter] let's start with the inaugural speech. let me tell you what i said --

it came to me afterwards. it seemed to me more a call to action than an appeal to unity. mr. gates: i think it's a fair statement and i think people need to get accustomed to the fact that this president is going to do things differently. he campaigned on being a disruptive force and there's no doubt in my mind that he intends to fulfill that. charlie: you probably have some republican and democrat friends sitting behind him who said he's talking about me. mr. gates: probably everybody. charlie: it was a head-on attack on people in washington who have been in power, republicans and democrats. mr. gates: that's absolutely right. what has been interesting to me is, i finished this book "a

passion for leadership" a year and a half ago. the whole first chapter is on how angry and frustrated americans are with government at every level and with big institutions that are so hard to make work for them. it creates every day challenges, whether you are trying to remodel your house, file your taxes or get a drivers license. my belief that these institutions need change and reform, and that is essentially what president trump ran on. charlie: there is a series of things. what is your role with him? does he call you often? mr. gates: very limited. i've had the one meeting. charlie: he has given you credit for suggesting the likely secretary of state. mr.gates: i had one meeting with

him. charlie: must have been a good meeting if he didn't invite you back. mr. gates: after some of the things i wrote, he was very gracious and moved past that. charlie: what did he say? did he say how could you say those awful things about me? mr. gates: he said you were really rough on me. i said some things were said during the campaign that troubled me greatly on national security. charlie: but now you say you are all for him. mr. gates: i was very frank with him. i said you are going to be the president and it is in all of our interests that you be successful on national security matters, so if there is anything i can do to help, i'm happy to help. charlie: he went out to see the cia people and stood in front of the wall there, which is sacred, as you know as the director of the cia. stars for people like robert ames and people like that who are heroes. he talked about failures there.

talked about crowd size. but at the same times that i love the cia and you have a big supporter in me and these reports of the division between us, you can blame the press. mr. gates: it was an interesting talk at the cia. charlie: so what did you think? gates: i thought the gesture going out there was important. his nominee, mike pompeo, has been one of those appointees who have reached out to me on several occasions. we have had good conversations about leading the agency and reform at the agency. charlie: does the agency need to be reformed? mr. gates: these institutions always need to be reformed. bureaucracies have a tendency to revert back to the main, which is inertia. falling back on old ways of doing things instead of looking to the future. i think the agency is always trying to figure out how to do

this better? how do we move forward? how do we reduce bureaucracy and put more people doing the real work out there in the field? i think the gesture of him going out there was very important. charlie: give me your assessment of what has happened during the transition and what you heard it -- in the inaugural. that speech said i'm serious about what i campaigned on. it was a sort of populist message he had been articulated. mr. gates: i think on national security, i have been very encouraged by the people he has named to the cabinet jobs. by tillerson, by john kelly at homeland security, by general mattis at defense. they both worked for me. they are extremely thoughtful, independent, strong minded

people. i know tillerson from the boy scouts and i have worked with him for a long time. we've talked about international affairs. he's going to be an independent-minded figure. i take some encouragement from the fact that the president-elect has chosen to surround himself in these cabinet positions with very strong, independent-minded people. my hope is, my expectation is they will give him advice and counsel straight from the shoulder, whether he pays attention or not remains to be seen. charlie: and then it is russia. you and i have talked about it before. i expect the president and you have a different view of vladimir putin. there is a question about where is russia, what is the relationship between putin and the president? mr. gates: i am concerned about the president's apparent unwillingness to criticize the russians. he has acknowledged the russians were behind the hacking, but in terms of russia's aggressiveness, it's meddling,

it's interventionism, it general bullying and thuggery, those are real. that is real behavior. charlie: have you talked to him about this? you are a russia expert. with your credibility, you say you've got it wrong on russia. mr. gates: i told him the same thing i told him at the senate hearing introducing rex tillerson. i said your administration is going to have to thread the needle and figure out how on the one hand to push back against vladimir putin's aggressiveness, meddling and interventionism. and at the same time stop the continuing downward spiral in the u.s.-russia relationship that is potentially quite dangerous. but they have to do both sides of it. they have to thread the needle. there has to be some pushback. you have to figure out a policy that does both. you cannot just be accommodating to russia and look for deals.

you have to be willing to push back against putin because he is a guy who has the old line about premier khrushchev. what's mine is mine and what's yours is negotiable. that is vladimir putin's approach. if you don't pushback on this guy, he will take advantage. they have to figure out how to do both of those things. charlie: syria today, is that a victory for vladimir putin? mr. gates: i think so. i think that what president obama referred to as the russian quagmire turned out to be the russians have kept their man in power. he will probably remain, assad will probably remain in power. but it hasn't gotten much attention but in the last couple of days, the russians and

syrians signed a deal with the -- where the russians are going to not only keep their naval base, but it will be more than doubled. they will have the capacity to put something like 11 warships in there, including nuclear warships. and they will get access, long-term access to an airfield in syria for russian airplanes. and it is for 49 years with an extension, another 25 years. charlie: but they get none of the world opprobrium for .upporting a thought -- assad so they can use barrel bombs and do all the destruction they did in aleppo to all of those people and creating all of those migrants, all of those refugees who flooded europe and you have changed the politics of europe. mr. gates: i think that's absolutely true. and you have several countries

in europe that would be eager to see those sanctions removed. the truth is, the eu sanctions require consensus and there are several members of the eu that could potentially be won over by putin through whatever means. charlie: here they are -- i'm not asking this but just making an observation -- russia and turkey are now cooperating with iran to talk about how we look at the future effort against isis. now the russians are attacking isis at long last now that a sod -- assad is much safer than he was at an earlier time. they are having meetings and the united states is not included. because pakistan -- because pakistan -- was included. mr. gates: the withdrawal was

always going to be complicated in terms of how do you do that without signaling the u.s. is withdrawing from broader involvement in the middle east and the reality is, some of the decisions president obama made, i think particularly in terms of crossed red lines in syria, in terms of not providing more assistance early to the syrian opposition to assad. the allowing iran to be open in and beupport of assad more aggressive and meddlesome in the middle east, i think it sent a signal to everyone out there to begin reevaluating where they stand and quite honestly, president trump's

rhetoric i think reinforces that notion among a lot of these countries. let's begin to recalibrate our relationship with the united states. they may be here, they may not be, so we are to think about a different kind of relationship with russia or with china. or with iran or with others. charlie: let me talk about the legacy of the obama administration. how do you evaluate his legacy in foreign policy and national security? mr. gates: i think you have to look at president obama's foreign policy mainly in the context of the experience with the wars in iraq and afghanistan. his determination to get out of iraq. meant inlution afghanistan, whether we could accomplish our objectives and the lesson learned from the intervention in libya, or the

result was chaos, that as much as anything made him extremely cautious in syria. i think you are seeing a recalibration of countries all over the world about -- in terms of their relationship with the united states. unfortunately, in this respect, some of the statements made by the new administration, by the president i think reinforces some of that, as i was just saying with respect to the middle east. if we pulled back, that vacuum will be filled by somebody. it won't just stay the way it is. whether it's russia or china or iran or somebody else, they are going to be there if we are not. and i'm not talking about a lot of troops and things like that. i'm talking about engagement and involvement. charlie: it seems to me that in a series of exit interviews,

with the secretary of state and secretary of defense, there is an idea that america isn't retrenching. they push back on that very hard. mr. gates: i know. i think most of them point to the pivot to asia, so-called. charlie: it has hardly stopped the chinese -- mr. gates: do the asians believe anything has changed? it's one thing to say you are pivoting and it's one thing to say you are going to deploy more forces, but if you say you are going to protect freedom of navigation, but then you won't do real freedom of navigation exercises and instead use innocent passage, which is what the chinese navy did when they went through the aleutian islands, you turn off your radar am whistle past the graveyard. charlie: then there is north korea.

how troubling is that? they may very well have a nuclear weapon and an icbm they can put it on and lay it into san francisco. mr. gates: the reality is the trump administration inherits a problem that goes back through at least three presidential administrations. charlie: what do you do now that they have gotten closer and closer? mr. gates: we have tried to negotiation's and the -- they've put the wallet out there with the string tied to it. they did take down some of their capabilities but then they have rebuilt them. there's only one peaceful way to resolve the north korean challenge and that is with china. charlie: the chinese are none too happy with us right now

because of the possible change in the one china policy. mr. gates: that's why the world is a complicated place and you have to understand if you push on one side, you're going to get a result on the other side. these things, i'm hoping as the administration settles and and approaches these policy issues and considers them in the national security doubtful, that they will come up not only with new policies, but policies that take these linked problems into account. charlie: let me repeat your word from september 16, 2016. "in domestic affairs, there are many checks on what a president can do. in national security, there are few. a shoot from the hip commander-in-chief is too big a risk. on national security, mr. trump is unprepared. he's temperamentally unsuited to lead our men and women in uniform.

he is unqualified and unfit to be commander-in-chief." i read that not to embarrass you, but have you changed your mind about that? mr. gates: this is what when we met, he said you are really rough on me. the answer to your question is exactly what i've told him. i said that's because things were said in the campaign about national security that troubled me very deeply. you have been elected. you are going to be the president and is important for all of us now that you be successful and if i can be helpful in that regard, i'm prepared to do so. and i believe others who are in a position to help should do so. every one of the candidates who reached out to me, those who he is talking to about being

secretary of state, various other positions, every single one of them, i say if the president asked you to serve, you need to serve. charlie: your book on leadership quotes napoleon and a bunch of other people. what should he learn from your book on leadership? mr. gates: it's one thing to acknowledge that reform and change and disruptive change is essential. figuring out how to do it that doesn't throw the baby out with the bathwater and that leads to entering and workable change, that is the real challenge. it's not just the assertion of the need for change, it's how you go about it that determines whether it will indoor beyond your -- will indoor -- will endure. that means getting people beyond

those institutions involved in the process and listening to their ideas about how to improve the performance of that organization, how to change the way it does business in a way that is productive. charlie: thank you for coming. great to see you. bob gates. back in a moment. ♪

charlie: my guess is the chief investment officer of the private wealth management group

at goldman sachs. every january, her team publishes an extensive and outlook on the global economy and financial markets. this year's report is entitled "half-full. it encourages investors to remain despite headwinds. it includes high market valuations, significant geopolitical tensions and the challenges post by the presidency of donald trump. i'm pleased to have her back at this table. welcome. sharmin: thank you very much. charlie: why do you call it half-full? sharmin: four couple of reasons. we want clients to think about the u.s. preeminence theme. it's a theme we've had for eight years and we're going on to our ninth year. the u.s. is preeminent. charlie: in the global economy? sharmin: in every aspect. in terms of labor activity, in terms of competitiveness

relative to other major exporters, if we are talking about earnings-per-share growth, whatever the factors are one could think of that matters in term of long-term economic prosperity, in terms of military strength, in terms of rate of innovation, on all those factors, the u.s. is preeminent and the gap between the u.s. and other developed economies as well as emerging-market economies is wide. charlie: so you are still betting on preeminence? sharmin: yes. charlie: what area are you worried about most? sharmin: china. we've been thinking china is a source of risk. we have at least two more years before a significant issue in china. our view is we still have a little time left, so 2017 should be fine. as time goes on, we have two big categories of concern.

one is the immense amount of debt. china is at risk. charlie: you suggest they spend more time creating debt than they do structural reforms? sharmin: they have definitely put structural reform in the back burner. there's a measure looking at credit to gdp gap -- how fast his credit going in china relative to trend growth? it's about 30%. anything over 10% is considered a danger zone, elevated risk. when the u.s. got to its peak levels before the financial crisis, it was at 12.4. china is at 30. that's a very alarming number and when we look at the pace of growth and debt, it has been very rapid. this is not a sustainable growth model. then we think about geopolitical issues. at the end of the day, things

are not going to continue as they have. charlie: let me bring in the donald trump factor. how do you weigh in the impact he'll have on the global market? sharmin: when we think of the trump administration, and most important factor is fiscal policy. at the margin, it will be good for the u.s.. whether it's a combination of infrastructure and tax cuts, individuals as well, some type of combination will be good. the best estimate is about .3%. that is one clear benefit in terms of a boost to the economy. charlie: you assume the republican-controlled congress is prepared to engage in that kind of fiscal spending? sharmin: we don't expect he will get all he campaigned on. that is why our estimate of about $200 billion is moderately conservative.

because of looking at the senate and house of representatives. charlie: he has made a promise to look at and lower, eliminate the amount of regulations. is that a positive impact? sharmin: if one believes the financial sector is key to the u.s. economy, that it the oil that let the engine run well, anything that lets that run effectively, we think it will be very good and you could see how some of the sectors have rallied and done better because the regulations are pulling back. charlie: jamie dimon, ceo of j.p. morgan has suggested not all of dodd-frank is bad. we support some of those regulations. we would not be in favor of pulling back from all of that. sharmin: for goldman sachs, the question becomes what regulation

is too much and what is too little. one thing the trump administration has said is we need to revisit all these regulations and see what is appropriate and what's not. that at the margin would be good for the economy. when we look at this economy since the trough of the crisis, it has grown -- charlie: why is that? sharmin: there are a number of reasons. from the trough after the financial crisis, why is it this has grown at half the rate? the policies have not been as effective as they have been in past recoveries. one of the main reasons is looking at fiscal stimulus. in the past, there's been more

physical stimulus. charlie: the reason for that is deadlock in congress. no grand bargain was possible. sharmin: exactly. we've had a lot more trimming of the deficit while typically you have had a boost from gdp. we've had the reverse over the last several years and that is probably reduced gdp by a. some of the other factors are the various external shocks from the sovereign wealth crisis. europe as the next journal shock, the big drop in energy prices. demographics have not been great. some people have referred to the hangover after such a deep financial and economic crisis, but that is dissipating. charlie: generally it takes longer to recover from a financial crisis than other kinds of economic crisis. or is it faster? sharmin: has been some

interesting research done on that. if one looks at the extensive data, it is not clear that a deep recession or deep financial crisis has to in a faster recovery. one has to look at the specifics of each individual case to come to that conclusion. charlie: but primarily, this recovery has been slower than we expected because we did not have any fiscal policy in place? sharmin: there are actually six reasons. fiscal policy is one of them. a much higher savings rate. households have saved significantly so their balance rates are in a better place. usually in a recession and slow recovery, households spend savings and reduce the savings rate. in this recovery, the savings rate has been substantially higher than normal. so people have not spent as much, so the recovery has been slower.

and other big theme is productivity. productivity has been lower over the last 10 years and that has prompted a lot of naysayers to say productivity in the u.s. will stay low. the reality is the savings rate is cyclical. one can have a 10 year or 15 year window of low product to the that can be followed by an unexpected surge in productivity. in the 70's, 80's and early 90's, everyone is saying we are no longer going to have chronic to the in the u.s. compared to a we have now at 1.3%, yes, after 1995, productivity surged. charlie: to some, they think that productivity means the illumination of jobs. sharmin: some jobs will be created and some jobs will be lost. we will have more of a service economy and productivity improvements in technology, as you know the uber cars, gps, there are all kinds of benefits and there will be negatives.

but i think it's speculation. in general, higher productivity and growth rates has been great for the economy. for other jobs, it will create jobs we don't even know about. charlie: what are you worried about in terms of geopolitical tension? sharmin: our view is some of the geopolitical tensions we currently have will continue. if we are talking about north korea and their belligerence, our view is that will continue. we saw that on december 30 where generally, north koreans have had a strategy of doing something somewhat belligerent around the arrival of a new president in the united states and in south korea. true to form, on december 30, the announced they will be testing inter-ballistic continental missiles. so they will do those types of

things, but we don't think it is a significant threat. we think tensions in the middle east will continue. that's not an easy solution anytime soon. issues with china and the south china sea will be significant. we think the u.s. will take a harder stance. if we think about the various recommendations, the u.s. does need to do a reset button. it's not a republican or democrat view, a lot of academics have said we need to reevaluate and reassess the relationship with china from an economic and military perspective and from a cyber security perspective. that reset will create some tension. charlie: cyber security is a big concern. sharmin: if you look at the cyber security attacks, the list is very long. none of them has been significantly threatening to the economy or financial markets. the key question is whether there will be one that affects the infrastructure.

that is unpredictable. our best cases that doesn't happen but it is unpredictable. charlie: what about monetary policy? sharmin: monetary policy has been very favorable all over the world, whether we are talking about the united states, japan, the eurozone. our view is generally that favorable monetary policy will be favorable. maybe three or four in 2018 -- we will have negative real rates in the u.s. and in other parts of the world like the eurozone, u.k. or japan. real negative interest rates are very stimulative and their balance sheets will be expanding relative to gdp, so they will make purchases on a global basis. though one exception is the u.s. charlie: when you look at the u.s. economic growth rate, those

in the trump administration talk wistfully about a 4% growth rate. when do you think we might have a 4% economic growth rate? sharmin: in that report, we referred to the numbers that had been touted 3% to 4% target. given everything going on in the u.s., we have had eight years of expansion. we don't think we're going to go into recession anytime soon, but to have 3% or 4% on a sustainable basis given demographics were an improvement in productivity would be a stretch. we can have one quarter or two quarters at a number that approaches for, but to have growth rates on an annual asis on -- in our view is not right. charlie: what do you think of larry summers'view on secular stagnation? sharmin: he was proven wrong on productivity. if you think about the productivity question, we have addressed this. we don't think one can say productivity will stay at these

levels. it looks like there could be tremendous upside. on the demographic side, demographics are not as favorable as they were in the 50's or 60's. there are policies one can do and larry summers talks about policies that could improve labor force participation. charlie: can they bring manufacturing back to the united states? sharmin: there's been an incredible study on the competitiveness of the u.s. from a manufacturing perspective and a look at the top 25. they say let's focus on the top 10 major countries and the u.s. was among the more competitive in 2004. now it is on par with south korea and china.

as competitiveness has improved and its ability to export has improved, to your point earlier about productivity and technology, if you're using technology and innovation and not relying on a lot of labor, that u.s. is not at a competitive disadvantage at all. some of it can clearly be brought back and these made in america studies from the boston consulting group show how much manufacturing is coming back to the u.s. for a number of reasons. one is cost competitiveness. they don't want supply chain disruption. they want to be close to the customer or client base. they can be more competitive and do more innovation, so for a whole host of reasons, it's realistic to assume some can come back. charlie: trade.

what if trade is damaged because of how the ministration seems to feel about trade? they are talking about fair trade and negotiated deals they say are fair, but negotiations is a difficult ring and it dismantles some of the deals we had begun to believe. sharmin: referring back to the china example where third-party think tanks and observers have said we need to reassess the relationship with a country like china which is a major trading partner if you look at the trade surplus -- charlie: what would happen if we put a 45% tariff from goods coming into china for -- coming in from china to the united states? sharmin: it would be disruptive

and the chinese would retaliate. the question is the increments. the headline might be inflammatory but at the end of the day, if one believes he does care about the bottom line and likes to make deals, the question is should one reassess the relationship with china and let it be more even keel? charlie: then there's high valuation is a risk factor. how do you factor that in? stocks have done very well. the s&p has done very well. sharmin: you look at equity valuations. equities have been cheaper 90% of the time. based on a host of valuation metrics, we are more expensive. valuation alone is not a reason to go out of the equity markets. if people had gone out of equities in july when they were in the 10th decile, they would

have left 500% returns on the table since 1995. our key message is valuation alone is not a reason to go out of u.s. equities, especially if you don't expect a recession. charlie: the u.s. sharmin: economy will grow at what rate? our expectation is 2.3%. if indicators persist, we are probably closer to 2.5%. record levels on the s&p? our ace scale is there's more upside than downside. have a modest appreciation of about 3%. charlie: thank you for coming. goldman sachs investment management division outlook i assume is available? on their website. thank you for joining us. see you next time. ♪

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