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Recession risk and the prospect of Fed halting rate hikes are top of mind for executives at the biggest US banks. Here are the 14 best quotes from their latest earnings calls.

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Wall Street Bull statueWall Street’s top banks have shared their outlook for the year ahead in their fourth-quarter earnings reports.

Nicolas Economou/NurPhoto via Getty Images

  • Top banks are taking a cautious stance as they weigh recession risks, commentary from their latest earnings reports show.
  • But there’s also optimism that the Federal Reserve’s interest-rate increases may be coming to an end.
  • Here are the 14 best quotes from bank executives’ earnings calls.

The biggest US banks have reported their fourth-quarter earnings over the past week – giving top executives the chance to share their outlooks for the year ahead.

Like ordinary Americans, they’re worried about a recession, but also hopeful that the Federal Reserve will offer markets some relief by easing up on its monetary-tightening campaign, with inflation now having fallen for six straight months.

Here are the 14 best quotes from some of the biggest names in US banking, lightly edited for length and clarity:

Morgan Stanley CEO James Gorman:

On the bank’s bullish economic outlook:

1. “We want to feed the beast. I mean, we’re growing parts of this firm. We’re not of the view that we’re heading into a dark period. Whatever negativity in the world is out there, that’s not our house view.”

On the Fed potentially sparking a stock market rally by pausing its interest-rate hikes:

2. “I see the Fed has moved from 75 to 50 [basis points], likely to go to 25. The next stop on the trend line is zero, and then to mention when they will start cutting. Not sure they are going to cut this year, but I think there will be zero increases this year for sure. So that’s the inflection point – and there’s a lot of money sitting around waiting to be put to work.” 

JPMorgan CEO Jamie Dimon:

3. “The U.S. economy currently remains strong with consumers still spending excess cash and businesses healthy. However, we still do not know the ultimate effect of the headwinds coming from geopolitical tensions including the war in Ukraine, the vulnerable state of energy and food supplies, persistent inflation that is eroding purchasing power and has pushed interest rates higher, and the unprecedented quantitative tightening.” 

JPMorgan CFO Jeremy Barnum:

4. “The health of US consumers and small businesses … are generally on solid footing, although sentiment for both reflects recessionary concerns not yet fully reflected in our data.” 

On the odds of the Fed cutting interest rates this year:

5. “2022 had a lot of themes. I think the active management community did well. And we had volatility with relatively orderly and continued markets. As we look towards 2023, maybe some of those themes will be a little bit less obvious and that could be a little bit of a headwind. But on the other hand, it’s not like the volatility is going away, and markets seem to continue to be quite orderly. And a 4.5%, 5% rate environment is probably one where there’s more trading opportunities than a 0% rate environment. So, of course, we don’t know. We’ll see. I think you would have to probably expect some normalization there. The numbers are really very strong in markets. But we’ll see.” 

Goldman Sachs CEO David Solomon:

On how companies are preparing for a potential recession:

6. “CEOs and boards tell me they are cautious, particularly in the near term. They’re rethinking business opportunities and would like to see more stability before committing to longer-term plans. Many firms have started preparing for tougher times, focusing on factors within their control.” 

 On why markets are currently going through a ‘reset’:

7. “The second half of 2020 and 2021 were not normal. They were way inflated by the massive fiscal stimulus that created excess activity, pulled a lot of activity forward. And then because of market disruption, we’ve tightened monetary conditions meaningfully in 2022.” 

8. “It’s the first year in over 50 years that both fixed income and equity markets were down. We had the S&P 500 down 20%, the Nasdaq down 30%. You had a real change in asset values across the spectrum – and when that happens, it takes a period of time for people to adjust.” 

Bank of America CEO Brian Moynihan:

On a spike in unemployment weighing on the economy:

9. “Just to give you a sense of how that scenario plays out, it contemplates a rapid rise in unemployment to peak at 5.5% early this year in 2023 and remain at 5% or above all the way through the end of ’24. Obviously [that is] much more conservative than the economic estimates that are out there.” 

On softening demand:

10. “The demand side is a little soft because people are reading the same headlines we’re all reading about recessions coming and… they should be careful.” 

Citi CEO Jane Fraser:

On the Fed tightening cycle potentially tipping the US into a recession:

11. “As we enter 2023, the environment is a tad better than we all expected, for the time being at least, despite the aggressive tightening by central banks.” 

12. “The Fed remains resolute in tackling core inflation, and therefore we continue to see the US entering into a mild recession in the second half of the year.”

13. “This is such an unusual market in the sense that you’ve got such strong labor market, driven by, frankly, supply shortage almost as much as demand. And we’ve also got the consumers with still very high savings that they’re dipping into, and we’re seeing a bit more of the movements happening at the bottom end of all of this. But this is not going to be like a normal recession, that’s why you hear us and others talking about the manageability and the mildness that’s likely if we do have one.”

Citi CFO Mark Mason:

On the prospect of dull market activity compared with last year’s volatility: 

14. “As for markets, we expect it to be relatively flat given the level of activity we saw in 2022… Now how that market and market wallet moves, I think, is going to predicate on a number of things, including how the macro continues to evolve and how central bank activity continues to evolve and how currencies move and the like. But again, I feel like we’re well positioned to hold our position, if not gain more share as that plays out. So, I think flat relative to a year that we’ve had up as significantly as it is, is a reasonable call based on what we know now.”

Read the original article on Business Insider
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