After 15 years of low interest rates and cheap corporate debt, global markets are poised for a “paradigm shift,” Morgan Stanley Co-President Ted Pick said at a New York financial conference in early June.
“It’s an extraordinary moment; we have our first pandemic in 100 years. We have our first invasion in Europe in 75 years. And we have our first inflation around the world in 40 years,” Pick said. “When you look at the combination, the intersection of the pandemic, of the war, of the inflation, it signals paradigm shift, the end of 15 years of financial repression and the next era to come.”
During the tumultuous period ahead, Pick said, inflation and recession will dominate the markets and require flexibility among investors. “We’ll have these periods where it feels awfully fiery, and other periods where it feels icy, and clients need to navigate around that,” he continued.
Other high-profile executives share Pick’s dire outlook. JPMorgan Chase Chief Executive Officer Jamie Dimon made news with his prediction of a coming “hurricane,” and Goldman Sachs President John Waldron said the simultaneous crises were “unprecedented.”
On Wall Street, Pick said, some banks will thrive while others may stand still. Government bond and currency traders will be more active as central banks around the globe contend with inflation.
Meanwhile, merger activity has declined recently. JPMorgan reported a 45% drop in second-quarter investment banking fees and a 20% increase in trading revenues.
“The banking calendar has quieted down a bit because people are trying to figure out whether we’re going to have this paradigm shift clarified sooner or later,” Pick said.
Pick has worked at Morgan Stanley for three decades and leads the firm’s trading and banking division. He is considered a frontrunner to eventually succeed CEO James Gorman.