So a lot of talk here about the economy, global economy, the U.S.
economy, is it turning down, is it not recession, that recession?
I mean, something like you with four point one trillion dollars have
entrusted their hard earned wealth to you to manage.
How do you manage into a world where there may be a downturn, maybe a
recession has affect your decisions? Yeah, that's that's a great question.
First of all. I would say the tone here, having come
here for the past decade, is is less depressed than it than it often is,
which is a good sign of hope of what's happening out there in the world, having
come off of the most difficult year for a balanced portfolio, 60 40, whether you
were in stocks or bonds or anything in between.
It was pretty rough sledding. And so I think everyone's happy that
that's behind us and looking forward and and the job of what all of us at J.P.
Morgan do is work on advising clients through the cycle.
And so we're gonna have lots of boom and bust cycles.
You've had a few people on today talking about it.
And I think the most important thing is to stay focused on diversification,
opportunity, not getting wedded to any one thing that looks like it worked in
the past. It may not work in the future.
And so we're spent we're spending a lot of time on that.
I mean, one of the things that really manifested itself through Covid was the
problem of home country bias, which creeps into almost everybody's
portfolios. And you have to be very aware and
conscious of diversifying out of it. So not only home country bias in terms
of the stocks and the bonds you buy, but also the currency.
And I think it's now a really important time that people think about how to get
all of that and the opportunities that they may have missed in other parts of
the world, especially parts of the world that are reopening and making it very
interesting. How about that, China?
You have had the development today of her, the vice premier meeting with Janet
Yellen, not too far from here in Zurich to try to start talking again.
What do you project for your investment purposes about what is likely going to
China? And how hopeful are you that that
reopening could really stimulate the world economy?
Absolutely. Having come back from Hong Kong just a
few weeks ago, you can just see the pent up demand of what's there, people
wanting to go in country, people wanting to come out of country to travel around
the world. I think the opening up of China.
Well, while it will have its ups and downs, it will hopefully be a net
exporter of deflation, which would be good for the world.
Getting all of those kinks out of the system and really bringing back growth
and in a positive way. So I'm looking forward to that.
I just say for us that J.P. Morgan getting to see our people who are
on the ground in China and have been working so hard throughout these many
years of us not being able to travel. And we're really excited about that.
We're looking forward to lots of good reunions and the like.
But people are really excited. And I think it means a lot of things.
A tone that you're hearing from from many that are that are either
going in already and or are just listening to some of the conversations
here today are really positive about what could be happening.
And of course, there's all sorts of negotiations that have to happen to make
sure that people do things in the right way, that people work forward to
cooperation on a fair and even playing field.
And I think that those are the important conversations that had to be that have
to be had. But now that we can do them in person,
it's going to be a hell of a lot more fruitful to be able to do it that way
than to try and do these things on some kind of a flat screen where you're not
you're not able to have those personal connections that are so important when
you're going through these negotiations. You mentioned the possibility of China
exporting deflation. I actually think about supply chains
opening up some supply chains more generally.
Do you think that there is some reassurance on the inflation for six
months ago? Probably would have been talking about
just inflation, inflation, inflation? It's still real.
It's still out there, but it seems maybe you're coming down some.
Do you anticipate freeing up supply chains to actually be a counterweight to
the inflation we've seen? Yes.
I mean, it's a funny thing when people say inflation has peaked or, you know,
it's not inflation is just going to grow slower.
We still have, you know, goods and services that are up 15 percent over the
past two years cumulatively. And so if you only grow at 4 percent for
the next two years, you're gonna find yourself at things that are up 25
percent from where they were before we started this.
So that's that's a lot to digest. And wages have to keep up with that.
Savings have to keep up with that. We've had nice cushions, particularly in
the U.S. consumer.
You know, we bank half the households in the United States of America through
Chase, and we can see a lot of the actual data.
There's been a nice cushion of days of cash on reserve and in people's
accounts, but that's depleting. And for the lower income, it looks like
that might that might get back to pre Covid levels of about 19 days worth of
cash access by the time summer comes in. That's that's that's that's not a lot of
cushion to be able to think about where that money needs to be spent.
And when prices continue to increase, you need to have the system in balance.
So, yeah, the Fed is doing its job. Effectively, the Fed funds rate is even
higher than what it may appear to be. There's some studies that show that it
may be as high as about six and a half percent effective in that in the in the
world. And so with the whole world is priced
off of fixed income, it's priced off of what is the discount rate you're going
to use on future earnings. So that's the most important
conversation that we're having. But thankfully, we're having it with
yield back. And so, you know, bonds have always been
a very important part of the conversation.
But with many of the negative yielding for the past several years, it's it's a
much better time to think about bonds in the portfolio and a positive
contributor. And so I think we're going to we're
going to have a better sledding going forward, which takes us back to your
portfolio. As you say, it's got to be balanced.
And you referred to 60 40 before when you have the discount rate really going
up. It favors bonds.
Does it disfavor equities? Is this a bad time, actually, to really
be doubling down in equities because that discovery is going to discount your
future cash flow? Yeah, I mean, I think most of that's
that's fairly priced in. It's going to depend on where things go
on any given day. It also depends on currencies and how
you think about that. But most importantly, it depends on
profitability of companies. So they have to go back to being
profitable. You're seeing companies rein it in a
little bit. Lots of announcements coming out over
the past couple of days. And so on the margin, people are going
to be really fine tuning how that works. And and those that are those those who
continue to show profit and growth for that they should be rewarded with high P
E ratios. And those are the companies you want to
invest in for the long term. And this is really about long term
investing. So that's that's that's the focus.
That's what people have to keep their eye on.
And that's what we spent a lot of time doing at J.P.
Morgan. In your letter this year, you described
the growth you've had at Asset and Wealth Management, J.P.
Morgan, and it certainly struck me is substantial growth.
You've added a lot of people entrusting their hard earned money to you.
How are you doing that? No, it's hard work every day.
I think that the the real benefit of J.P.
Morgan Chase is we are on the ground around the world and we are in touch
with what's going on in a way that maybe others are more limited.
And I always say it is it's irresponsible to be investing in today's
world. If you're just going to do it passively
and you're going to sit back and you're going to think that the world's going to
take care of it, it's equally irresponsible to think that you can only
focus on one part of the world and not think that the whole place is
interconnected. You have to understand what's happening
in China. You have to understand what's happening
in India. It affects the local company you're
investing in when in whatever country that you're living in.
And so all of these things are really important.
And our insights that we bring to bear for our clients and the opportunities
that we can present them with, whether it's in the public markets, in the
private markets, lots of climate tech opportunities, you know, just there's
there's an enormous amount of things that people are passionate about wanting
to invest in. And I think that that's that's that's an
exciting time for us. You mentioned climate tech as you build
your business, one client at a time. Yes.
How important is environmental, social governance?
I mean, is something that they bring up to you.
Do you retain clients that way? Do you lose clients because they're not
so enthusiastic about it? I will say that the letters ESG are not
actually directly related with with each head.
There are three different and important letters and all three of them are
important with different degrees to different clients.
And it's our job at JP Morgan to think about how we express a client's desire
of where they want to invest, how they want to invest, what's important to
them. And we express that through different
vehicles and different parts of the world.
And I think we do a really good job of where you've been coming to Dallas for a
while now. What's the biggest difference this year,
do you think? I am shocked that there is no
conversation about Covid. I am equally shocked that there's very
little conversation about crypto and there's not even handwringing about
things like cyber and the like. So I think the worry list is still out
there. People have to keep it on the forefront
of their minds. And the answer to every question is
diversification.