Top bank executives are convening in Saudi Arabia for the annual Future Investment Initiative conference, expressing pessimism about the global economy’s trajectory this year. Ongoing Middle East conflicts rank among their chief concerns. BlackRock (BLK) CEO Larry Fink stated that war breeds societal despair, which leads to “contractions in economies.”
Yahoo Finance’s Seana Smith and Brad Smith delve into the dismay surrounding the global economy, discussing issues like oil cuts in Saudi Arabia and Russia, along with worries about geopolitical tensions.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Video Transcript
SEANA SMITH: Let’s get you the market commentary of the day, and it’s the latest that we’re hearing from executives. They’re feeling a bit more pessimistic about where the economy is heading. We’ve got some fresh commentary out of a conference in Saudi Arabia, out of Riyadh here today. Now, Bridgewater Associates founder Ray Dalio saying, quote, “If you take the time horizon, the monetary policies that we are going to see will have greater effects on the world. It’s difficult to be optimistic about that.”
We also have from Citigroup CEO Jane Fraser echoing the similar tone here, saying that she believes, quote, “We’re sitting here with the backdrop of the terrorist attack in Israel and the events that have unfolded since, and it’s desperately sad, so it’s hard not to be a little pessimistic at this point.” And very similar tone when you take a look at pretty much most of the commentary that we’re getting there from the conference.
BlackRock’s Larry Fink saying that the wars in Israel and in Ukraine, if they’re not resolved, it will lead to far greater fear and insecurity, less hope in society. When there’s less hope, we see contractions in our economies. Goldman’s David Solomon was warning just about the uncertain market right now for M&A and where exactly that is headed, and then Jamie Dimon also brought up the fact about the forecasting here from central banks, from the Fed has been so wrong over the last 18 months, that that could then lead to some humility and we were taking into account the outlook here for next year, but Dimon saying that he is cautious about what is going to happen when you look ahead to 2024.
So I think it’s a number of factors. We just mentioned the escalating tensions in the Middle East. We know, obviously, Fed policy as well. And then you also have the elections here in the US, how exactly that could shape policy going forward, certainly clouding, I think, the outlook for many of these top leaders.
BRAD SMITH: Yeah, I think you did an excellent job of laying out what’s taking place at Davos in the desert, as they call it. But ultimately here, the tone, as many executives have noted, as you were mentioning, and they are apt to really note what’s taking place internationally, what the conflict is, and cite that and name it while they are there, but also I think there’s something larger too that they also have to remember and consider here.
I mean, they’re sitting in an area where Saudi Arabia and Russia, they’ve already extended voluntary oil cuts until the end of the year here, and that is another inflationary pressure that all of these economists, bank CEOs, people who are speaking and monitoring where those oil prices are also putting pressure on the inflationary picture internationally, where that continues to need to come up in conversation and where there is at least a furthering of where some of that can abate in the future.
But that is, I think, another kind of outlier discussion that needs to take place, and perhaps one where we’ll get a little bit more color, either coming after or perhaps while things are continuing to go on in that Davos in the desert meeting. But there was, of course, a question mark for a lot of these executives as to whether or not they would actually even go. For those that have showed up, we’ll see what they see as the kind of return on investment of their time while there too.
SEANA SMITH: Yeah, there was lots of questions just about what attendance was going to look like. At least in terms of what we have heard as of late, it doesn’t seem like there were many cancelations lately, given the fact of the escalating tensions that’s happening right now in the Middle East following Hamas’s attack on Israel. But when you take into account also just what they’re saying more broadly speaking, right, about geopolitical policy right now, geopolitical tensions, how exactly that could weigh on the economy, obviously it’s always been an issue clearly, but really, that has been brought in the forefront here over the last couple of weeks, given the fact that, obviously, also how it’s playing out down in Washington too.
We don’t have a Speaker of the House. The House not able to approve potentially more aid going towards Israel, going toward Ukraine, so certainly a number of factors that these business leaders are pointing out over in Saudi Arabia just about what are the potential drivers for the market, for the broader economy here going forward.
BRAD SMITH: Right, and three big impacts just as we end this conversation too. Number one, we talked about the commodities impact and that potential there on oil. But then, additionally, you think about what consumer sentiment, especially if coming out of this meeting and you see more of a de-globalization that transpires even further, that’s another risk.
But then also here for all of these businesses and for the CEOs that have continued to cite geopolitical tensions as some of their top concerns, at least over the course of this year and how that permeates into next year, it’s also going to have a larger implication as of who is the next CEO of the United States and what their policy will be, and that could take us back to the entire tariff conversation too, which is another headwind pressure that many of these business CEOs will need to think about as well
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