The US economy is enduring a number of obstacles, but president of JP Morgan Chase & Co. Daniel Pinto warns that a number of political and economic threats might cause things to worsen.
Speaking at the Institute of International Finance meetings in Marrakech, Morocco, Pinto stated that while businesses and consumers are strong due to their high savings rates and sound financial positions, stress would be brought on by factors like persistently high inflation and interest rates that are either unchanged or rise further.
According to Pinto, “there are plenty of things that could go wrong.” He said, “They include the escalation of issues surrounding Russia’s invasion of Ukraine, the attack on Israel by Hamas, and complications arising from the US’s relationship with China.”
The CEO of Fidelity International, Anne Richards, described the global situation as “very, very complex.” Richards remarked at the same event, “It is probably the most complex picture I can think of in many, many years.”
The failure of numerous minor US lenders earlier this year, including Silicon Valley Bank and Signature Bank, rocked the banking sector. Richards advised authorities to exercise caution and refrain from taking any actions that might discourage investment in order to try and stop a recurrence of such failures.
Higher rules intended to avert any failure will cause “more risk capital to flow through into non-bank sector,” according to Richards, adding that might cause issues in that domain.
According to Richards, the focus should be on systemic issues and having the appropriate resources available “during times of stress.” She stated that mutual funds will be limited in what they may invest in if they don’t view measures like gating by mutual funds to control outflows as a reasonable answer to a temporary crisis.
According to Pinto, inquiries concerning the viability of medium-sized banks’ business models are warranted.
First Republic Bank mismanaged its interest-rate risk, rendering it exposed in the eyes of investors and consumers. JPMorgan bought First Republic Bank after it experienced a run on deposits amid the broader banking upheaval earlier this year. Pinto claimed that numerous of its assets were “pristine.” “They were simply sold at the incorrect price.”
Richards stated that there is evidence that political risks are permeating the financial markets more than they have in the recent past, especially in light of the turmoil in the bond market.
After experiencing a period of “centrist political stability,” Richards noted that the more volatile political climate in the US and the UK has contributed to market fluctuations.