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- Wall Street leaders issued grim economic outlooks at an event in Saudi Arabia on Tuesday.
- Ray Dalio, Jamie Dimon, David Solomon, Larry Fink, and Steve Schwarzman all shared their views.
- They tackled topics such as inflation, recession, the Israel-Hamas war, and commercial real estate.
Some of Wall Street's biggest names issued bleak outlooks for the global economy during the Future Investment Initiative in Saudi Arabia on Tuesday.
JPMorgan CEO Jamie Dimon, BlackRock CEO Larry Fink, Goldman Sachs CEO David Solomon, Blackstone CEO Steve Schwarzman, and Bridgewater Associates founder Ray Dalio all shared their views.
They touched on everything from the Israel-Hamas conflict and pressures on commercial real estate to inflation, interest rates, fiscal and monetary policies, and the risk of recession.
Here's a summary of what they said:
1. Ray Dalio
The legendary investor and founder of the world's largest hedge fund said he was "pessimistic" about the global environment. He highlighted political tensions within and between countries, historic amounts of government debt in the US and other countries, and the Russia-Ukraine and Israel-Hamas conflicts.
"If you take the time horizon, the monetary policies that we're going to see and so on, will have greater effects on the world," Dalio said. "And you look at the world gaps, so it's difficult to be optimistic on that."
2. Jamie Dimon
The billionaire bank chief said it would be "foolish" to ignore the problems plaguing the world. He underscored how foreign conflicts have pushed up the prices of food and energy, fueled migration, and raised the threat of starvation for the many people affected.
Dimon also bemoaned the massive amounts of fiscal spending in recent years, and how that's increased government debt. "I'm cautious," he said. "I don't know what's going to happen."
The JPMorgan CEO pointed out that central banks' economic forecasts were "dead wrong" 18 months ago, and recommended investors be prepared for fresh challenges next year.
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3. David Solomon
The Goldman Sachs chief recalled the boom in mergers and acquisitions coming out of the pandemic, as massive amounts of fiscal stimulus and rock-bottom interest rates fueled "extreme confidence."
However, company leaders are now far more wary, and that's weighed on deal volumes in recent months, Solomon said: "Long term I'm certainly optimistic, but I'm uncertain now."
4. Larry Fink
The head of the world's largest asset manager predicted interest rates will rise further, as he expects a slew of global trends including populism and pushback against legal immigration to fuel inflation.
However, Fink ruled out an economic downturn or full-blown recession next year, as he believes government-spending programs will shore up output, and the Fed's hikes to interest rates will take a while to cool demand.
"We will not see a hard or a soft landing in 2024," he said, adding that either of those could strike in 2025.
The BlackRock chief also warned that if problems such as the Israel-Hamas war aren't resolved, they're likely to result in more terrorism, more insecurity, more fear, and ultimately "contractions in our economies."
However, Fink predicted that technological advances in robotics, artificial intelligence, medicine, and other areas would eventually drive down prices: "I would continue to be heavily long-term invested over a long cycle."
5. Steve Schwarzman
The Blackstone boss said he's navigated six economic cycles in his career, giving him a good sense of what's happening now.
"We're coming off the top and we're starting to go down, so that would say to me that next year perhaps is not so wonderful, but then you'll hit your bottom and then we'll go up again," Schwarzman said.
"The trend is up – but we're living in a post-pandemic world," he added, meaning it will take time to move past the pain of inflation and higher interest rates. He also pointed out that a recession struck after the Arab-Israel war in 1973.
Schwarzman argued that official inflation statistics were overstating the problem, as Blackstone's portfolio companies had virtually no increase in their input costs last quarter. He also noted that revenue growth has slowed but profits have swelled in many cases, even though workforce expansion has slowed dramatically.
"It says to me that the Fed is actually having pretty good impact in terms of taking inflation out of the system," he said.
Schwarzman also jabbed at people who work from home, saying they don't work as hard. He complained the remote-working trend is threatening to lift vacancy rates in some office buildings to 30%, making them unviable. "That's going to have a very bad ending."
Still, the billionaire executive pointed out that other types of commercial real estate including warehouses were thriving.