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Sunday, February 5, 2023

Cloudy with likelihood of hurricanes for Wall Street, bankers say

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All of a sudden, everybody on Wall Street is speaking concerning the climate.

With the conflict in Ukraine and coverage tightening by the US Federal Reserve making monetary forecasting more durable than standard, JPMorgan Chase chief govt Jamie Dimon has targeted on the heavens by using meteorological metaphors to make sense of the financial turbulence.

The head of the most important US financial institution by property kicked off the dialogue final week when he stated on the firm’s investor day that he noticed “big storm clouds” on the financial horizon that had but to succeed in hurricane energy.

“They may dissipate. If it was a hurricane, I would tell you that,” Dimon stated, including: “They may not dissipate, so we’re not wishful thinkers . . . We can handle all of that.”

By Wednesday, Dimon’s forecast appeared to have grown gloomier.

“I said they’re storm clouds, they’re big storm clouds here. It’s a hurricane,” he stated at a convention organised by Autonomous Research. “That hurricane is right out there down the road coming our way. We just don’t know if it’s a minor one or Superstorm Sandy . . . and you better brace yourself.”

Bank of America chief govt Brian Moynihan picked up the theme hours afterward Wednesday when he was requested on the identical convention whether or not he was on “hurricane watch in terms of the economy”.

“We’re in North Carolina,” stated the chief of the Charlotte-based financial institution. “You’ve got hurricanes that come every year. So, we’re always prepared . . . we don’t have a choice.”

On Thursday, Goldman Sachs president John Waldron took on the extreme storms query with out prodding when requested for his view of the macroeconomic backdrop.

“I’m going to try not to use any weather analogies,” he stated to laughter from the gang, earlier than including: “This is among, if not the most complex dynamic environment I’ve ever seen in my career . . . The confluence of the number of shocks to the system, to me, is unprecedented.”

Bill Demchak, a former JPMorgan banker who’s now chief govt of PNC, a US financial institution with about $540bn in property, advised the convention he had “no weather forecasts” however was additionally bearish concerning the economic system.

“I don’t see any possible outcome other than a recession,” he stated. “I don’t think it’s going to be the hurricane. I think we’re going to have a slowdown.”

Mike Mayo, Wells Fargo banking analyst, stated Dimon’s feedback had been shocking for his or her “extra negativity” within the house of simply over per week.

Mayo stated the remarks added to his doubts that JPMorgan would quickly be capable to hit a roughly 17 per cent return on tangible frequent fairness, a measure of profitability. Dimon stated final week there was “a very good chance” the financial institution may attain that focus on this 12 months.

“To us, the new comments seem like hedging on this 17 per cent level only one week after putting it on the table at investor day,” Mayo wrote in a observe to purchasers.

JPMorgan stated in a press release: “Jamie’s views are consistent with his investor day comments that there is a wide range of potential economic scenarios.”

Source: www.ft.com

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