Two of Wall Street's Biggest Names Are Sounding the Alarm on the U.S. Economy

Updated on
  • BlackRock CEO says consumers, businesses are crimping spending
  • JPMorgan head sees something wrong with the United States

Parsing What JPMorgan's Dimon Said in Shareholder Letter

Two of Wall Street’s most influential CEOs -- Larry Fink and Jamie Dimon -- are raising warning flags over the nation’s economy.

BlackRock Inc.’s Fink said Thursday that U.S. growth is slowing on concern whether the Trump administration’s agenda will get through Congress. Dimon lamented that “it is clear that something is wrong” with the nation in a letter to investors Tuesday. Both CEOs are part of a group of business leaders that advise President Donald Trump.

Larry Fink

Photographer: Justin Chin/Bloomberg

Fink expressed chagrin over the pace of changes so far under the new administration. He told CNBC the U.S. economy is slowing as both consumers and businesses wait to see if the new administration can deliver on tax reform and deregulation following the failure of the health-care bill in March.

"There’s a greater worry that these proposed changes are going to be harder and harder to execute," said Fink, speaking on CNBC Thursday. "You’re seeing a slowing down of our economy."

Fink said the U.S. may be the slowest-growing economy in the first quarter among the G-7 nations. Japan, Canada and Europe are expanding faster than anticipated six months ago while the U.S. is lagging expectations. Without tax reform and deregulation, he said, the markets will suffer setbacks.

Dimon used his 45-page annual letter to list ways America is stronger than ever -- before jumping into a much longer list of problems. Since the turn of the century, the U.S. has dumped trillions of dollars into wars, piled huge debt onto students and forced legions of foreigners to leave after getting advanced degrees, he said in the letter. He called for infrastructure investment and reducing corporate taxes to lift the economy.

Jamie Dimon

Photographer: Christophe Morin/Bloomberg

Why JPMorgan CEO Dimon Warns ’Something is Wrong’ With U.S.

Fink, the head of the world’s largest asset manager, said the most crowded trade right now is that rates are going to move much higher. Instead, he said, there’s a 51 percent chance that 10-year Treasuries drop below 2 percent.

BlackRock is trying to accelerate its own growth, particularly in its struggling stock-picking business, by relying more on quants to stem the outflows from active funds.

Last week BlackRock announced it’s shifting $6 billion of the $201 billion run by stock pickers into offerings with lower fees where quants play a role. The firm is also firing more than 30 people in its active-equities group, including five of its 53 fundamental portfolio managers, said a person familiar last month.

Fink said on CNBC that the moves are not a substitution of humans with machines. "It is a reorientation in the large-cap area of U.S. equities," he said. "It is a recognition there are more sources of information."

The money manager is doing a lot of research on artificial intelligence, Fink said, but the idea that computers are now able to stock-pick without human input is "more of a myth than a reality."

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