Don’t ignore threats like inflation, recession, and war, warn Wall Street’s biggest bosses

• Wall Street’s head honchos are wary of economic threats like inflation, recession, and war.
• JPMorgan’s Jamie Dimon, Goldman’s David Solomon, and Citi’s Jane Fraser warned against complacency.
• BlackRock’s Larry Fink and Blackstone’s Steve Schwarzman flagged fear and uncertainty in markets.

The bosses of Wall Street’s biggest firms struck a cautious tone on the US economy during their first-quarter earnings calls, transcripts provided by AlphaSense show.

They suggested inflation and interest rates could drop, and the economy might keep growing and skirt a recession. But they also warned that stubborn price increases, persistently high borrowing costs, a painful downturn, and overseas conflicts are threats that shouldn’t be ignored.

Here are the latest warnings from eight financial titans, lightly edited and condensed for clarity:

1. Jamie Dimon, JPMorgan CEO

“I’m on the more cautious side. We’re okay right now. It does not mean we’re okay down the road. If the 10-year bond rate goes up 2%, every asset on the planet, including real estate, is worth 20% less. Obviously, that creates a little bit of stress and strain.

“If things stay where they are, we have the soft landing that seems to be embedded in the marketplace, the real estate will muddle through. They won’t muddle through under higher rates with a recession. That would be tough for a lot of folks, not just real estate, if that happens.”

2. David Solomon, Goldman Sachs CEO

“I’m mindful that US equity markets are hovering near record levels at a time when we continue to see headwinds, including concerns around inflation, the commercial real estate market, and escalating geopolitical tensions around the world. This combination could slow growth.

“While the environment is constructive and markets expect a soft landing, the trajectory is still uncertain.”

3. Jane Fraser, Citigroup CEO

“Growth this year looks poised to slow in many markets and conditions are generally disinflationary.

“I couldn’t agree with you more about geopolitical risks and fragility. I think the market’s too benign in its risk pricing on some of these factors.”

4. Larry Fink, BlackRock CEO

“I’ve spoken before about the fear we see today, some of it stoked by increasingly political polarization in the world.

“There’s still a record amount of cash on the sidelines. I think this stems from fear and uncertainty, but it’s hard to achieve retirement or long-term objectives by holding cash.”

5. Stephen Schwarzman, Blackstone CEO

“The market environment will remain complex. The economy is stronger than expected, but it’s starting to slow a bit. We believe inflation will trend lower this year, although the pace of decline has slowed recently.

“Geopolitical turbulence, including wars in the Middle East and Ukraine, adds further uncertainty to the business environment. And 2024 is a major election year, as we all know with nearly half of the world’s population going to the polls, which injects unpredictability around the future of important policies that impact the global economy.”

6. Ted Pick, Morgan Stanley CEO

“We’re in a period that comes after financial repression, where we’ll have some inflation and some real rates.

“It depends on whether rates are higher because they are sustaining continued growth in the US, or if they are higher for a period of time and are followed by a tough landing, in which case we’re in recession and clearly then things will slow down.”

7. Michael Santomassimo, Wells Fargo CFO

“Weaker loan demand reflected the impact of clients being cautious, given the higher rate environment and the anticipation of lower rates this year as well as some potential uncertainty in an election year.

“Given what’s happening in rates, plus what’s happening in quantitative tightening, what’s happening in sort of the economy overall — it’s going to all matter in terms of what happens with deposit levels.”

8. Alistair Borthwick, Bank of America CFO

“Higher for longer is probably better for banks as a general statement. An awful lot will depend upon just the ‘why’ for rates. If it’s just because it’s taking a little while longer for the inflation to nudge down before the next set of cuts, that’s probably a good environment for us.

“It’s only been a quarter since we were last here talking about six cuts. Now, it’s three. So, we just have to watch this play out and stay patient.”