In his opening remarks for the 2019 Jamaica Stock Exchange (JSE) Conference, Jamaica “bond king” Gregory Fisher noted that this will be his 14th year as lead sponsor of the Jamaica Stock Exchange conference, a particular honour as it coincided with the JSE’s 50th anniversary celebration.
Fisher, formerly of Bear Stearns and Oppenheimer, is now part of global investment banking firm Jefferies, which has 4,000 employees worldwide, more than US$11 billion in long-term capital, and is part of the S&P 500.
Looking at the US, Fisher noted that in his speech at the conference last year, he had expressed concern that a new and untested US Federal Reserve Board would likely overtighten like its predecessors that had embarked on interest rate policy normalisation after a major economic expansion, and forecast market volatility.
At the end of last year, the so-called ‘December Massacre’, the S&P 500 was down an epic 13 per cent (the worst December since 1931), with two consecutive months where the US markets declined in excess of seven per cent.
He noted that markets just don’t go up and down 1,000 points at a time in a bull market, and in fact this sort of volatility has always been a characteristic of anything but a bull market.
There have been 13 Fed tightening cycles since the World War II era, and 10 of those periods landed the US into a recession. The other three “soft landings” were just as challenging from an investing perspective. While not predicting an imminent recession, Fisher argues the US stock market is clearly telling the Fed that they are putting this long-winded expansion at risk, just like when new Fed chairman Alan Greenspan in the summer of 1987 tried to flex his anti-inflationary muscles similar to what the current Fed Chairman, Jay Powell, has been trying to do now.
With 90 per cent of the S&P 500 already in correction territory (more than a 10 per cent drop), even if a US recession is avoided in 2019, he argues the US is seeing a growth slowdown.
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