• Ideas
  • March 24, 2022

James Gorman Shares His Insights on Global Markets, Interest Rates and Inflation

Morgan Stanley’s Global Chairman and CEO was the international keynote speaker at the recent Australian Financial Review Business Summit in Sydney.

During a recent visit to Australia, Morgan Stanley Chairman and CEO James Gorman, spoke at the Australian Financial Review Business Summit in Sydney, where he shared his perspectives on topics including the recent market volatility, inflation rising interest rates and the energy transition.

In conversation with Chanticleer columnist Tony Boyd, Gorman also shared his insights into the firm’s strategy – including successfully executing three of the largest wealth and asset management acquisitions made since the crisis: Smith Barney, Eaton Vance, and E*Trade – along with valuable lessons learned during the financial crisis of 2008.

Below are some highlights from the discussion: 

On Interest Rates and Inflation

On interest rates and inflation, Gorman said that the U.S. Federal Reserve faces a tough balancing act in restoring interest rates to normal levels amid rising inflation, while Russia’s invasion of Ukraine adds to the current market volatility, uncertainty and higher energy prices. Because of this uncertainty, he predicted that the U.S. Federal Reserve would raise the cash rate by 25 basis points instead 50 basis points at the March meeting and anticipated methodical increases in the future.

“They have to raise rates, but you don’t want to tip the economy into a recession,” Gorman said.

“My current bidding would be the Fed will raise very methodically now. No surprises up or down,” he added.

“At some point you have to get to neutral rates which will it be around 2 to 2.5 per cent in the US. Whether it’s next year thereafter, it doesn’t matter.”

On Sustainability and Decarbonisation

Asked about sustainability and decarbonisation, Gorman said Morgan Stanley, like Australia, has set 2050 as a target for net zero carbon and that “We’re targeting by 2030 to do $1 trillion in sustainability financing.

“This is a multi-decade transition the world is in and the public will not put up with the cost of energy if we force change immediately,” he added. “It has to happen in a measured way. And we’re working with companies to help them finance this transition as we move down this path.”

On the Financial Crisis and Market Volatility

Gorman recalled how the financial crisis of 2008 taught him several valuable lessons, including one that is very relevant today, that “with volatility comes opportunity.”

“There’s nothing like a crisis to force you to act. We had the luxury of not having a choice. The question was when making the choice that we make the right ones. Thankfully, so far, it has played out.”

Asked about his views on the current market volatility, representing the largest Wealth Management business in the US, Gorman said: “You've got to expect volatility, and with volatility comes opportunity. So you don't panic. This is what the market does. It goes up and down. But over the long run it's constantly going from bottom left to top right. So I'm not fazed at all.

On Australia’s Relationship with China

Asked about the relationship between Australia and China, Gorman said he expects China and Australia will continue to do business together forever despite what he called “some hiccups in their trade relationship.” He added that China remains linked to Australia for its minerals to build bridges, roads and houses. 

“I think China and Australia remain linked for a very long time,” he said.
“It’s in both long-term interests. I don’t see that fundamentally changing.”

Image by Lucas Jarvis, Eventive Photography via The Australian Financial Review.

 

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