February 8, 2023

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Morgan Stanley’s Pick says a paradigm shift has begun in markets. What to expect

2 min read

Trader on the floor of the NYSE, June 1, 2022.

Source: NYSE

Global markets are in the beginning of a fundamental shift after a nearly 15-year period defined by low interest rates and cheap corporate debt, according to Morgan Stanley co-President Ted Pick.

The transition from the economic conditions that followed the 2008 financial crisis and whatever comes next will take “12, 18, 24 months” to unfold, according to Pick, who spoke last week at a New York financial conference.

“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.”

Wall Street’s top executives delivered dire warnings about the economy last week, led by JPMorgan Chase CEO Jamie Dimon, who said that a “hurricane is right out there, down the road, coming our way.” That sentiment was echoed by Goldman Sachs President John Waldron, who called the overlapping “shocks to the system” unprecedented. Even regional bank CEO Bill Demchak said he thought a recession was unavoidable.

Instead of just raising alarms, Pick — a three-decade Morgan Stanley veteran who leads the firm’s trading and banking division — gave some historical context as well as his impression of what the tumultuous period ahead will look and feel like.

Fire and Ice

Markets will be dominated by two forces – concern over inflation, or “fire,” and recession, or “ice,” said Pick, who is considered a front-runner to eventually succeed CEO James Gorman.

“We’ll have these periods where it feels awfully fiery, and other periods where it feels icy, and clients need to navigate around that,” Pick said.

For Wall Street banks, certain businesses will boom, while others may idle. For years after the financial…

2022-06-05 10:07:00

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