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BEVERLY HILLS – Risks in the global marketplace were one of the main topics of discussion on the first day of the Milken Institute's World Conference – perhaps without surprise, given the recent apprehension over a possible recession .
What was surprising, however, was the inability of the Milken Jury members to agree on the most likely source of turbulence. There is usually something that resembles a consensus around the greatest risk, be it the trade war between the United States and China, or the Federal Reserve.
But not now.
Without a well-defined adversary, the investment landscape and the economy are as uncertain as they have been for some time. This has forced experts like Milken to take a more defensive stance, even if the financial markets remain strong in the short term.
All of this fits in with the cautiously optimistic tone that characterized the first day's panels in Milken. Although there are still recipes to glean on the market, most people look over their shoulders, while waiting for the appearance of a different scarecrow.
Below are the main concerns expressed by 10 experts on two separate Milken panels.
Lara Warner – Group Risk Director, Credit Suisse
"I hate to say, but it has to come back to Europe, I'm afraid we're in a period where small earthquakes can lead to big tsunamis, and it seems to be the most fragile place. . "
"We have just talked about the United States and some of the disparities between the states and the federal government, and Europe, in many ways, is an example of that, as a region. is very likely, with several elections coming up pretty much next year, we will see shocks. "
"Our concern is: you have these shocks, no monetary option, no tax option, frankly, undeveloped financial markets as you see here in the US Some, but not strong, exposure to the Asian region, which is probably the most bubbling region in the world, it's the place that worries us the most. "
Ronald O. Hanley – President and Chief Executive Officer, State Street Corporation
"I do not know if it's a risk or a phenomenon, but I think it's this idea that, since everything requires technology, what are the requirements in terms of scale? And are we witnessing an inevitable consolidation in all sectors?
"We are in the current situation, in the financial services sector, that between regulation and the effective use of technology, it is no longer too big to go bankrupt.It is too small to be developed and I think this is happening in industries around the world.It's great to develop the application.But the application does not work if you do not develop the platform. you can not expand the platform if you do not have scale.
"How do we think, as investors, what to invest in to achieve the kind of scale we think we need?"
Scott Minerd – Director of Investments, Guggenheim Partners
"I am concerned about the butterfly effect, that risk premiums are so low, assets are so valued, that all these unresolved issues – whether in Europe, Latin America, or elsewhere – are such that, as in 1998 With the Asian crisis, an event like the devaluation of the Thai baht will trigger a chain reaction to which we are not prepared.
"In the longer term, the real risk I see is that we are going to end up with inflationary discomfort because we do not have real political solutions." What we live today looks like many years ago. 1940 and 1950. And finally, when the 60s came, with the worsening of the deficit with the Vietnam War, inflation began to take off.
"We look like the frog proverb in the pot of water.How do you boil a frog? You just put it in cold water, light the fire and let it slowly boil the pot. "
David Hunt – President and Chief Executive Officer, PGIM, Prudential's Investment Management Division
"Systematic underestimation of risk premiums is a major risk, but we all suffer from the last war, and I think we are all very aware of what happened during the big financial crisis.
"The next crisis will come from a different place, I think it will come from technology and cyber, if I were looking for what worries me the most, it would be a real attack on the infrastructure of the people. Financial markets that really bursts and creates a closure of the main pipelines that we use to do business.It is something we invest a lot of time on. "
Tom Finke – President and Chief Executive Officer, Barings
"When we invest, we wonder what will disrupt the businesses in which we can invest today, and are they aware of it? What are the changes or upheavals of a sector we have known for a long time? to get up at night. "
Joseph Naggar – Partner and Head of Structured Products, GoldenTree Asset Management LP
"Overall, we are watching more closely the US dollar, which grew about 9% last year. Oil is falling in the mid-70s. What will change this environment into gold ore. It's a race between central banks and slower growth, and central banks are winning. Things like these could change the macroeconomic environment. "
Mark Machin – President and Chief Executive Officer, Canada Pension Plan Investment Board
"The isolation in all its forms."
Sir Michael Hintze – Group Executive Chairman and Chief Investment Officer, CQS
"Energy, oil represents about 3 to 3.5% of the world's GDP, the other energy elements represent about 2%, this price change will really change the world, but if you really want to know what's holding me awake at night, it is the global pandemic problem that will destroy the world.
"If you look at what happened when SARS struck, only 37 people died.The reality is that world GDP was reversed by 3-4% virtually overnight." something that could lead us to the cleaner. "
Elif Bilgi Zapparoli – Co-Head of Global Financial Markets, Bank of America Merrill Lynch
"Low interest rates, which makes it possible to misjudge the risk."
Mark Attanasio – Co-founder and Managing Partner, Crescent Capital Group LP
"If you look at the growth of the US stock market and wage growth, you will see a significant outperformance of stock growth as wages have remained relatively stable while increasing." The good news is that it keeps the stock The bad news is that it creates all kinds of fractures in this country that can be irreparable if they are not changed quickly. "
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