LONDON: A chorus of top bankers say they are feeling positive about the prospects for the United States economy under President-elect Donald Trump and think his tariff threats will be manageable.
At the same time, many senior financiers and asset managers at Bloomberg’s Women, Money and Power conference on Tuesday said they see Europe facing slower growth and political division that will hold the continent back.
Both regions will need to tackle inflationary pressures that have eaten into people’s living standards, the executives said at the gathering.
“The bright spot is America – you talk a lot about a lot of roads leading here, fantastic entrepreneurship, this country is incredible,” said Jane Fraser, chief executive officer of Citigroup Inc.
“Europe has a tougher time. They’ve got some more structural challenges: the labour market is not as flexible, they don’t have the scale that the United States has and they’ve got some challenges in terms of competitiveness.”
Ana Botin, executive chairperson of Banco Santander SA, agreed, saying there is an “urgent need” for Europe to reform and argued the continent’s member states need to be spurred towards co-operation and have a greater focus on risk taking.
“One thing that works in Europe and Brussels is, ‘Oh my God, the Americans are going to get ahead again’,” Botin said. “That’s the one thing that seems to work.”
Anne Walsh, chief investment officer of Guggenheim Partners Investment Management, said markets had failed to price in the risk of France’s political chaos following a no-confidence vote. Germany’s economy is also facing “recession pressures”, she added.
“On a fundamental basis, Europe has struggled and I think will continue to do so,” she said.
Some of the recent political turmoil that has swept through the continent could present an opportunity for Britain to take more of a leading role in Europe’s relationship with America during Trump’s second term, according to Jane Hartley, the American ambassador to the United Kingdom.“Your first call is to the United States and our first call is to the United Kingdom,” Hartley told the audience in London.
“There’s some worry about the bigger countries in Europe, which is why I do keep coming back to the United Kingdom and we need the United Kingdom to lead because, as we know, we’ve seen a lot of political instability recently in France, political instability in Germany. So the United Kingdom has to play a role.”
The event’s speakers offered a generally positive view of the United States economy, with business figures predicting that Trump’s vows to impose wide-ranging cross-border tariffs would be watered down.
The incoming administration “are probably going to use the tariffs as a bargaining chip and it probably will not be as bad” as many fear, according to Paula Volent, chief investment officer of Rockefeller University’s US$2.5bil endowment.
Many of the executives said the growth in private markets is set to continue and Walsh predicted the value of private credit assets could double in size to US$4 trillion globally.
Morgan Stanley has boosted offerings for rich clients looking to invest in private businesses in recent years, largely as these companies prolong their paths to initial public offerings, according to Elizabeth Dennis, head of the lender’s private wealth management arm.
Meanwhile, Citigroup’s rich clients typically now have more than a quarter of their portfolios allocated to private markets, according to Ida Liu, global head of the New York-based firm’s private bank.
“There’s going to be a greater and greater allocation to private,” said Joan Solotar, who oversees private wealth solutions at Blackstone Inc.
“Increasingly, the recognition is if you’re only investing in stocks and bonds, that’s a pretty narrow pool.”
Franklin Templeton Investments chief executive officer Jenny Johnson offered one word of warning on the surge in private credit, noting these assets should trade at a premium to traditional fixed-income assets given their lower liquidity.
“You get no premium for illiquidity – that worries me,” she said. Franklin oversees a total of US$1.6 trillion in assets.
Dealmaking activity is expected to pick up from the lull of recent years as the Trump administration takes office, according to Christina Minnis, head of global credit finance at Goldman Sachs Group Inc.
“Since the election, there’s been an increased amount of inquiry, both from sponsors as well as corporates that were either on the sidelines or nervous about what was going to happen,” Minnis said.
For her part, Man Group Plc boss Robyn Grew said she was open to more deals to add to the acquisitive hedge fund’s record, particularly in the area of credit.
The challenges for 2025 may include more of the unusual events that have disrupted the world order recently, several of the attendees predicted.
“Geopolitical is going to trump economic for the next 12 months,” said Alison Rose, former CEO of NatWest Group Plc and now an adviser to private equity firm Charterhouse.
“I think we will have a couple of one-in-100 year events.” — Bloomberg
