Do you think the markets are too optimistic?
Well, let's see. So first, starting with the U.S., I
think that the probability of soft landing in the U.S.
are increasing as time goes by without really that inflation will get to was
below two and a half percent core by by the end of the year.
And and that gives an impetus for the economy to do relatively fine.
You look at the consumer is in a very good place.
The corporate sector is in a very good place.
So there are no big imbalances that you can see.
Having said that, the market was pricing until yesterday six cards, which is a
very unlikely scenario because if you put yourself in the shoes of the Fed, if
that is the scenario and unemployment rises so tight, then the economy is
doing fine while you're going to rush it.
So I think that is very likely that the Fed will cut if everything continues to
go this way, but probably later in the year and less than the market is
expected. So because this is because all the good
news, I guess, has already been priced in, we have quite a bit of a rally
towards the end of last year. Yeah, I think that even though the
environment is nervous, so when you think about equity markets, there is
somebody pricing a very high multiple when you are going to have on on very
optimistic earnings for next year, earnings growth, you are going to higher
interest rates. So it is very unlikely that you are
going to have a lot of upside for here in the scenario that even in the worst
scenario, the soft landing spreads are very tight.
So and then you have all the peripheral risk that they are quite substantial.
So the geopolitical situation is stable, deteriorating, terrible things
happening in Russia, Ukraine, the Middle East, the tension between China, the
U.S. electoral cycle.
So there are issues that for sure they haven't been priced in the market.
So I think that is a time to be careful on this sort of optimism, even in the
scenario where the soft landing takes place and recession at some point will
happen. But probably if that is a center is an
idea, is that 26, 27% event, would you actually expect a correction in equity
markets across the world and especially in the U.S., or is it just that it won't
do much this year? I think that depends on the scenario.
If if we are wrong and inflation is now coming down towards the levels and the
Fed has to stay higher for longer, I'll do more in that scenario for sure.
You would have a recession probably this year.
I think that these are relatively low probability.
I think that the scenario where the soft landing is Anchor So therefore what you
are going to see is a market that doesn't go anywhere, that and in any
event, because it's a bit high in price, it will create some volatility.
But why is it so difficult to the markets, for example, to understand you
positive And Jeremy, don't call this the most dangerous time.
We see it a little bit playing out on oil prices, but actually in the in we
don't have the kind of maybe fear that we would have had four or five years ago
on market because geopolitics, you look at history.
Geopolitics never affect the economy too much
is a big issue, except it massively escalates.
So therefore, in that scenario, we haven't seen a big impact of geopolitics
into global growth. So on into oil pricing.
So essentially, if anything, the background is really what is going on,
but it hasn't really affected much the functioning of the economy.
I mean, how much would the US elections actually change?
Again, your forecast for the US, if we have President Donald Trump in the White
House, what kind of policies could actually change this trajectory for the
US economy and therefore frankly, the world?
I don't know. It is too early to say.
As a company we invest in, we invest all along for the long term.
We operate at a regional level in the US with every community, every state.
And we've been going through these government the previous and the previous
one and all of those. So we will continue that.
We're visiting the always aggressive business.
We employ around 200,000 people and we want to continue to do that regardless
of who is in the White House. So you're quite confident about the US
economy with a soft landing? That's your base case.
What happens with China, Europe and the rest of the world?
I think that China is it has many, many challenges.
Real estate is one. The they have issues with their
population, age and things like that. So though the the stimulus to the
economy is going to stabilize growth probably for the first half of a year in
the medium term, we see the Chinese economy slowing down in growth and
Europe is struggling. I think that high energy prices, the
slowdown in China, people are they are concerned savings
rates are going that. In the United States because people
believe in the economy and they feel confident those found in in Europe is
having exactly the opposite because of the war and the economy not growing and
all the challenges that they are facing. So there are issues.
So those are important issues. And at the moment they are not
improving. But if you look at European equities,
they're cheap. So is it actually a good time again to
bring it back to the markets? Well, I think the 24 bringing in, I
think that they are priced they're going to bear pricing, the economic reality to
go from there to achieve. I think that is maybe a bit too early
for say, is there anything else in emerging markets when you look at
there's a lot of debt? I don't know what that means for fixed
income. Is there anything that you either see in
a bubble or just being mispriced? I think that emerging market is one of
the good things that they have done is they started focusing on inflation way
before they developed markets. They started normalizing.
So therefore, when the global developed markets normalized rates, the emerging
markets were not affected by it. I think that they are in a in a very
good position. I think that some of the countries but
the concept of emerging markets as a totality, I think that is a flawed
concept and concept. You can see Mexico doing very well
because or a lot of the business is going there and there is a huge amount
of investment. Hopefully my country with a new
government is creates a beginning of a new era.
The president of Argentina is here, is here that he'll also meet with the IMF
head tomorrow. Yeah, and I think that they are doing
all the right things. It will be a tough year for Argentina,
for the population of the country. But is the society tolerates the
adjustment of the pain of the adjustment.
I think that this may be a great thing for the will be the
beginning of a change of this 80 years of deterioration of the country.
Talk to me about Jp morgan. Record high for the share price.
What will drive growth in the future? Oh, we are that the stock price have
done well because the company is doing very well.
But there are so many things. So is if you look, I think that we
always look to myself all the time. We look at not just that you're number
one, here are number one there. We look at the components of that.
And when you think of all the opportunities that we have for growth
wealth management in the United States, we are now in every state in the United
States, 48 states except Hawaii and and Alaska.
And in some of those days, we are relatively new.
We are very small market share. We can see growth there.
International retail is another opportunity payments.
So there is plenty of growth coming here.
And so I think that the company and the company has the returns that have the
firepower to continue investing through the cycles.
And that is what really allow us to continue regardless of the economic
environment, to continue growing. And we see some of your competitors
actually retrenching from some of the markets.
There's also job losses. So can Jp morgan absorb some of that,
some of the things that other banks actually say they can handle?
I think that we are focused in whatever is our core investment areas.
Some of the ones that I mentioned we have at the moment, we are employing
at the end of this year around 320,000 people.
So the number of people that we employ has been growing and not shrinking.
So I think that where we see opportunities
and we can have our clients for sure, we are focusing on that.
So hiring this year. Yes.
Where I mean good bonuses is probably what we're expecting from Jp morgan
hiring Is is is this year going to be great for your bank?
I hope so. You never know that.
But I think that all the components are for a for for an extra year.
So I think that the opportunities in retail, in the investment environment,
we see an increase in wallet, in investment banking that is been very
subdued for the last couple of year. So depending on volatility, markets will
do well. We see more growth in payment.
So and we did. Yeah.
When I look at our plans with any increase, we will increase our staff
this year for sure. On regulation.
So what concerns you I know you've always thought about liquidity, you've
always thought about market functioning and kind of you, you know, the pipeline,
the pipes that make everything move. There's also new capital rules, like
what's on your mind? Well, Basel the implementation of us are
the three again in the US is being a bit of a challenge.
The industry is going to suffer in the response to the regulation.
But I think that one of the objective of the regulation is, is go, which is
harmonization. I think as plan in the US, it may be
many things, but there are no harmonised in anything.
So I think that that will be one of the challenge.
And you have thinks that the that they are going to they are create they want
to have outcomes that probably they are not want it like more and more.
Push from the regulated sector into the unregulated space.
I think that a lot of the capital is going towards markets where the market
is already having problems with liquidity, and this will make it even
even worse that at the end it will affect one of the big advantages a US
have to have an amazing capital markets. So overall, I think that hopefully there
is analysis on the economic impact and the impact tomorrow because of this
regulation and it gets graduated to a point where it makes sense to have it.
Do you worry that this could lead to some kind of financial stability event
further down the line? That I don't know.
I think that it will create for sure it will create a greater an increase in the
cost of credit into the economy, the market, liquidity.
And and when markets are illiquid, you know what happen.
I think that that should be at the top of the mind of the Fed and other
regulators to understand what are the implications of what they are doing and
address alongside with it.