Evelyn Reynolds

JPMorgan Chase CEO Jamie Dimon said market expectations are too high that the U.S. economy will see a soft landing.
However, he doesn’t expect a replay of some of the other serious downturns the U.S. economy has faced, such as the 2008 financial crisis.
Higher interest rates along with a recession could hit areas such as commercial real estate and regional banks hard, but with limited macroeconomic impacts, Dimon said.

JPMorgan Chase CEO Jamie Dimon thinks there’s a better-than-even chance that the U.S. is heading for a recession, though he doesn’t see systemic issues looming.
Speaking Monday from the JPMorgan High Yield and Leveraged Finance Conference in Miami, the head of the largest U.S. bank by assets said markets probably aren’t pricing in a strong enough probability that interest rates could stay higher for longer.

Dimon noted “there are things out there which are kind of concerning,” and he disagreed with the high level of probability being assigned to the economy missing a recession.
“The market is kind of pricing in a soft landing. That may very well happen,” he told CNBC’s Leslie Picker. “But the [market’s] odds are 70 to 80 percent. I’ll give you half that, that’s all.”
The comments come as the market indeed has had to reprice its expectations for monetary policy. Where futures traders earlier in the year had been assigning a high probability to an aggressive series of interest rate cuts starting in March, they now see the easing not starting until June or July, with three cuts now priced in — half of the prior expectations.
Along with the elevated rates, markets have had to contend with the Federal Reserve rolling off its bond holdings, a process known as quantitative tightening. While the central bank is expected to start tapering the program soon, it remains another factor in tight monetary policy.
“It’s always a mistake to look at just the year,” Dimon said. “All these factors we talked about: QT, fiscal spending deficits, the geopolitics, those things may play out over multiple years. But they will play out and they will have an effect and in my mind I’m just kind of cautious about everything.”

However, Dimon said he doesn’t expect a replay of some of the other serious downturns the U.S. economy has faced, such as the 2008 financial crisis that saw Wall Street plunge as banks were hit with fallout from the subprime mortgage industry collapse.
Higher interest rates along with a recession could hit areas such as commercial real estate and regional banks hard, but with limited macroeconomic impacts, Dimon said.
“If we have a recession, yes, it’ll get worse. If we don’t have recession, I think most people will be able to muddle through this,” he said. “Part of this is just a normalization process. [Rates] were so low for so long. If rates go up, and we have recession, there will be real estate problems, and some banks will have a much bigger real estate problem than others.”
As far as regional banks go, he labeled issues that hit institutions such as Silicon Valley Bank and New York Community Bank as “idiosyncratic” and said private credit could take hit but not at a systemic level.
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The $1 billion private credit partnership will co-invest in the Asia Pacific region, with a particular focus on India.
The news follows Goldman’s 2023 expansion in the Middle East with the opening of its office in Abu Dhabi Global Market, the financial center of the UAE capital.

An Emirati woman paddles a canoe past skyscrapers in Abu Dhabi, United Arab Emirates, on Wednesday, Oct. 2, 2019.
Christopher Pike | Bloomberg | Getty Images

DUBAI, United Arab Emirates — Goldman Sachs and Abu Dhabi sovereign wealth fund Mubadala on Monday signed a $1 billion private credit partnership to co-invest in the Asia-Pacific region, with a particular focus on India, the institutions said in a joint statement.
The separately managed account, termed the “Partnership,” will be managed by Private Credit at Goldman Sachs Alternatives, with a staff based on the ground in various markets across the region. It will invest the long-term capital in “high quality companies … across the private credit spectrum” across a number of Asia-Pacific markets.

The news follows Goldman’s 2023 expansion in the Middle East with the opening of its office in Abu Dhabi Global Market, the financial center of the United Arab Emirates capital.
It also comes as the UAE and other Gulf states increase their economic footprint in India, which is set to be the fastest-growing G20 economy for the 2023-24 fiscal year. The UAE in October 2023 announced a target to invest $75 billion in India over a period of time, while Saudi Arabia set an investment target in the country of $100 billion.
“India, in particular, stands out as a key market with significant opportunities in private credit, and where Goldman Sachs has strong exposure and capabilities,” said Fabrizio Bocciardi, Mubadala’s head of credit investments, in a press release.

“The opportunity in private credit in Asia Pacific is expansive,” Greg Olafson, global head of private credit at Goldman Sachs Alternatives, said. “With strong economic growth in the region and favorable conditions for private lenders to support the growth of leading companies by providing flexible, long-term capital, we believe we are at the early stages of a defining era for private credit in Asia Pacific.”
He said the partnership with Mubadala will enable the bank to expand its “long-established investment focus on the region.”

Omar Eraiqat, Mubadala’s deputy CEO of diversified investments, said that the Goldman Sachs partnership “compliments our aspirations to grow our private credit exposure in APAC, a region that is central to Mubadala’s strategic growth initiatives.”
Mubadala Investment Company manages a global portfolio of $276 billion spanning six continents and a range of sectors and asset classes, according to the firm, with a focus on diversification of the UAE economy. More

Taylor Swift’s Eras Tour undoubtedly helped the local economies she held concerts in, but Nomura sees the national-level effect being smaller than some anticipate.
Estimates from the firm show the tour helped nominal U.S. retail sales by 0.03% and real gross domestic product by 0.02% between the first and third quarters of 2023.

Taylor Swift performs onstage at Lumen Field in Seattle on July 22, 2023.
Mat Hayward/tas23 | Getty Images Entertainment | Getty Images

The devil’s in the details, but local economies have a friend in Taylor Swift.
The American pop star has spent nearly a year crossing the U.S. and the globe with her high-flying Eras Tour. The economic effect of the “Karma” singer’s show has caught the attention of everyone from the Federal Reserve to Wall Street.

Her tour undoubtedly helped the local economies she visited, according to a new report out from Japanese investment bank Nomura. But the firm questions how much of an imprint it made on national data.
“Her boost to consumption has certainly enchanted US economic analysts, but we believe the total macroeconomic effect is probably overstated,” Nomura global economist Si Ying Toh wrote to clients last week.
Between the first and third quarter of 2023, Swift’s venture alone lifted nominal U.S. retail sales by 0.03%, and real gross domestic product, a measure of economic output, by 0.02%, Nomura estimates show.
For all of 2023, the 14-time Grammy winner’s tour accounted for 0.5% of nominal consumption growth, according to the firm’s calculations.
Though those data points can be considered marginal, Toh said the economic boost — which some have dubbed the “Swift-lift” — is “undeniable” for the 20 cities U.S. she visited.

Stops on The Eras Tour saw a bump of 2.1 percentage points to lodging inflation during the month of Swift’s visit, according to STR data cited by Toh. Data from hotel booking platform Trivago shows a similar rise, she added.
Looking at Chicago specifically, Toh estimated that lodging prices rose 3.1 percentage points due to Swift’s three shows there. The city, which is the third-most populated in the U.S., saw a bump of 8.1 percentage points in occupancy and a 59% increase in hotel revenue per available room during Swift’s stint.
From that, the consumer price index for the Illinois city increased 0.5 percentage points from the singer’s visit alone. CPI is the measure of a basket of goods and services used to calculate changes in costs over time.
It’s less likely for these local improvements to materialize in national-level statistics from larger economies such as the U.S., U.K. or Japan, Toh said. Still, these events are worth watching as potential economic catalysts in countries around the globe, she said.
Internationally, small economies such as Singapore and Sweden could see the biggest macro boosts from her tour, according to Toh.
“Exogenous shocks play a key role in economic modeling, whether in the form of an extreme weather event, a pandemic or … a pop concert,” Toh wrote to clients. “In recent years, concert tours have grown to become not just major social phenomena but also potentially a significant driver of economic activity.”
Swift’s tour is set to conclude near the end of 2024. The film version, which already captured more than $200 million globally through a movie theater run, begins streaming on Disney+ on March 15.
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Germany’s housebuilding sector is in a “confidence crisis,” Dominik von Achten, CEO of German building materials company Heidelberg Materials, told CNBC.
The sector has gone from bad to worse in recent months with the latest economic indicators hitting all-time lows.
It is questionable whether there is light at the end of the tunnel as pressures such as elevated interest rates continue to weigh on the economy.

A construction site with new apartments in newly built apartment buildings.
Patrick Pleul | Picture Alliance | Getty Images

Germany’s housebuilding sector has gone from bad to worse in recent months.
Economic data is painting a concerning picture, and industry leaders appear uneasy.

“The housebuilding sector is, I would say, a little bit in a confidence crisis,” Dominik von Achten, chairman of German building materials company Heidelberg Materials, told CNBC’s “Squawk Box Europe” on Thursday.
“There are too many things that have gone in the wrong direction,” he said, adding that the company’s volumes were down significantly in Germany.
In January both the current sentiment and expectations for the German residential construction sector fell to all-time lows, according to data from the Ifo Institute for Economic Research. The business climate reading fell to a negative 59 points, while expectations dropped to negative 68.9 points in the month.
“The outlook for the coming months is bleak,” Klaus Wohlrabe, head of surveys at Ifo, said in a press release at the time.

Meanwhile, January’s construction PMI survey for Germany by the Hamburg Commercial Bank also fell to the lowest ever reading at 36.3 — after December’s reading had also been the lowest on record. PMI readings below 50 indicate contraction, and the lower to zero the figure is, the bigger the contraction.

“Of the broad construction categories monitored by the survey, housing activity remained the worst performer, exhibiting a rate of decline that was among the fastest on record,” the PMI report stated.
The issue has also been weighing on Germany’s overall economy.
German Economy and Climate Minister Robert Habeck on Wednesday said the government was slashing its 2024 gross domestic product growth expectations to 0.2% from a previous estimate of 1.3%. Habeck pointed to higher interest rates as a key challenge for the economy, explaining that those had led to reduced investments, especially in the construction sector.

Light at the end of the tunnel?

Ifo’s data showed that the amount of companies reporting order cancellations and a lack of orders had eased slightly in January, compared to December. But even so, 52.5% of companies said not enough orders were being placed, which Wohlrabe said was weighing on the sector.
“It’s too early to talk of a trend reversal in residential construction, since the tough conditions have hardly changed at all,” he said. “High interest rates and construction costs aren’t making things any easier for builders.”
Heidelberg Materials’ von Achten however suggested there could be at least some relief on the horizon, saying that there could be good news on the interest rate front.

“I’m positive inflation really comes down now in Germany, maybe the ECB [European Central Bank] is actually earlier in their decrease of interest rates than we all think, lets wait and see, and if that comes then obviously the confidence will also come back,” he said.
Even if interest rate cuts are a slow process, von Achten says as soon as “people see the turning point” confidence should return.
Speaking to the German Parliament about the economic outlook on Thursday, Habeck said the government was expecting inflation to continue falling and return to the 2% target level in 2025.
The European Central Bank said at its most recent meeting in January that discussing rate cuts was “premature,” even as progress was being made on inflation. While the exact timeline for rate cuts remains unclear, markets are widely pricing in the first decrease to take place in June, according to LSEG data.    More