Wall Street Remains Concerned About Persistent Inflation: Insights from the Future Investment Initiative

Amid the Future Investment Initiative summit in Saudi Arabia, leading figures from Wall Street expressed greater concern over persistent inflation than the outcome of the U.S. presidential elections in 2025. Larry Fink, CEO of BlackRock, noted that the global economy is experiencing deeply rooted inflation, unlike anything seen before. However, the central question is the associated costs—a question that is currently receiving little attention. Although the political future of the U.S. was in the room, few attendees dared to make clear predictions about a win by Kamala Harris or Donald Trump on November 5. Ken Griffin, CEO of Citadel, commented that while Trump is seen as the favorite, the race resembles a coin toss. Stephen Schwarzman, CEO of Blackstone, expressed uncertainty about the election outcome but noted that Trump now has a better understanding of his office. Marc Rowan, CEO of Apollo, expects an increase in mergers and acquisitions in the event of a Trump victory. Regardless of the election outcome, there is consensus among financial leaders that inflation is more persistent than initially assumed. Accordingly, they do not expect interest rates to fall as quickly as traders currently foresee. Larry Fink emphasized that interest rates will not drop as low as predicted. While traders expect the Fed to soon cut rates by another 25 basis points, the panel participants at the meeting in Saudi Arabia were skeptical of a rapid easing of monetary policy. David Solomon from Goldman Sachs pointed out that inflation is more entrenched in a global context than current narratives suggest. Jamie Dimon from JPMorgan Chase shared similar concerns, pointing to the possibility of a resurgence of inflation similar to the 1970s. A major aspect of Wall Street's inflation-related worries is the growing U.S. deficit, which could continue to expand under both political parties. Both Harris' and Trump's economic policy proposals could lead to significant additional burdens on U.S. debt, with Trump's plans potentially having greater impacts. Reflecting on last year's summit, which was overshadowed by geopolitical tensions like the Israel-Hamas conflict and the Ukraine crisis, corporate results are nevertheless positive. The stocks of many banks and investment firms have improved by over 40% since then. Despite ongoing geopolitical challenges, the feared global recession has yet to materialize, as Ron O'Hanley from State Street noted.