Finance

Jamie Dimon said the U.S. is headed for the best economic growth in decades.
Dimon, the longtime CEO and chairman of JPMorgan Chase, said his confidence stems from the robust balance sheet of the American consumer.
Dimon said that while the underlying economy looks strong, stock market investors may endure a tumultuous year as the Fed goes to work.

Jamie Dimon said the U.S. is headed for the best economic growth in decades.
“We’re going to have the best growth we’ve ever had this year, I think since maybe sometime after the Great Depression,” Dimon told CNBC’s Bertha Coombs during the 40th Annual J.P. Morgan Healthcare Conference. “Next year will be pretty good too.”

Dimon, the longtime CEO and chairman of JPMorgan Chase, said his confidence stems from the robust balance sheet of the American consumer. JPMorgan is the biggest U.S. bank by assets and has relationships with half of the country’s households.
“The consumer balance sheet has never been in better shape; they’re spending 25% more today than pre-Covid,” Dimon said. “Their debt-service ratio is better than it’s been since we’ve been keeping records for 50 years.”
Dimon said growth will come even as the Fed raises rates possibly more than investors expect. Goldman Sachs economists predicted four rate hikes this year and Dimon said he would be surprised if the central bank didn’t go further.
“It’s possible that inflation is worse than they think and they raise rates more than people think,” Dimon said. “I personally would be surprised if it’s just four increases.”
Dimon has expressed expectations for higher rates before. Banks tend to prosper in rising-rate environments because their lending margins expand as rates climb.

Indeed, bank stocks have surged so far this year as rates climbed. The KBW Bank Index jumped 10% last week, the best start to a year on record for the 24-company index.
However, Dimon said that while the underlying economy looks strong, stock market investors may endure a tumultuous year as the Fed goes to work.
“The market is different,” Dimon said. “We’re kind of expecting that the market will have a lot of volatility this year as rates go up and people kind of redo projections.”
“If we’re lucky, the Fed can slow things down and we’ll have what they call a `soft landing’,” Dimon added.
The bank was forced to move its annual healthcare conference to a virtual format because of the spread of the omicron variant of Covid-19.

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Take a look at some of the biggest movers in the premarket:
Zynga (ZYNG) – The online game maker’s shares soared 48.2% in the premarket after it agreed to be acquired by video game maker Take-Two Interactive (TTWO) for $9.86 per share in cash and stock, implying a total deal value of $12.7 billion. Take-Two tumbled 8.9%.

Lululemon (LULU) – The athletic apparel maker said it now expects fourth-quarter earnings and revenue to come in at the low end of its projected ranges, saying it had experienced a number of negative consequences from the spread of the Covid-19 omicron variant. Lululemon slid 6.5% in premarket action.
Apria (APR) – The home health care services provider agreed to be acquired by health-care equipment and services company Owens & Minor (OMI) for about $1.45 billion in cash, or $37.50 per share. Apria had closed Friday at $29.72 per share, and its stock surged 24.5% in premarket trading. Owens & Minor shares slumped 9.1%.
Tilray (TLRY) – Tilray gained 3.6% in premarket trading after reporting an unexpected quarterly profit. Revenue increased by 20% from a year earlier on stronger demand for cannabis products, although its sales were below analysts’ forecasts.
Beam Therapeutics (BEAM) – Beam shares jumped 5.3% in the premarket following the announcement of a new partnership with Pfizer (PFE). Pfizer will collaborate with Beam – which specializes in gene editing – to develop therapies for rare genetic diseases.
ViacomCBS (VIAC) – ViacomCBS rallied 3.2% in the premarket after Deutsche Bank upgraded the media company’s stock to “buy” from “hold,” based on upbeat prospects for its streaming business and the likelihood of continuing industry consolidation.

Sinclair Broadcast Group (SBGI) – Sinclair is close to finalizing a deal to carry NBA games on its planned new streaming app, according to a Bloomberg report quoting people familiar with the matter. The deal could be announced as soon as this week. Sinclair gained 1.4% in premarket action.
SolarEdge Technologies (SEDG) – SolarEdge was added to the “Conviction Buy” list at Goldman Sachs, which raised the price target for the solar equipment company’s stock to $448 per share from $420 a share. Goldman cites improvements in battery storage capacity as well as the company’s prospects for increasing profit margins. SolarEdge rose 2.4% in the premarket.
Shockwave Medical (SWAV) – Penumbra (PEN) is exploring a combination with its rival medical device maker, according to people with knowledge of the matter who spoke to Bloomberg. However, Penumbra told Bloomberg in an emailed statement that it is not in discussions with Shockwave to pursue a business combination or similar transaction. Shockwave jumped 6% in premarket trading.
Dell Technologies (DELL) – Bernstein upgraded Dell to “outperform” from “market perform,” noting Dell’s approximately six-week backlog in its PC business as well as a relatively high mix of commercial versus consumer business. Dell added 2.4% in the premarket.

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Goldman Sachs expects the Fed to raise rates four times this year, one more than previously forecast.
The estimate comes amid rising inflation and a tightening jobs market.
Along with the rate hikes, Goldman sees the Fed shrinking its bond holdings soon.

Federal Reserve Chairman Jerome Powell testifies during the House Financial Services Committee hearing titled Oversight of the Treasury Department’s and Federal Reserve’s Pandemic Response, in Rayburn Building on Wednesday, December 1, 2021.
Tom Williams | CQ-Roll Call, Inc. | Getty Images

Persistently high inflation combined with a labor market near full employment will push the Federal Reserve to raise interest rates more than expected this year, according to the latest forecast from Goldman Sachs.
The Wall Street firm’s chief economist Jan Hatzius said in a note Sunday that he now figures the Fed to enact four quarter-percentage point rate hikes in 2022, representing an even more aggressive path than the Fed’s indications of a just a month ago. The Fed’s benchmark overnight borrowing rate is currently anchored in a range between 0%-0.25%, most recently around 0.08%.

“Declining labor market slack has made Fed officials more sensitive to upside inflation risks and less sensitive to downside growth risks,” Hatzius wrote. “We continue to see hikes in March, June, and September, and have now added a hike in December for a total of four in 2022.”
Goldman had previously forecast three hikes, in line with the level Fed officials had penciled in following their December meeting.
The firm’s outlook for a more hawkish Fed come just a few days ahead of key inflation readings this week that are expected to show prices rising at their fastest pace in nearly 40 years. If the Dow Jones estimate of 7.1% year-over-year consumer price index growth is correct, that would be the sharpest gain since June 1982. That figure is due out on Wednesday.
At the same time, Hatzius and other economists do not expect the Fed to be deterred by declining job growth.

Nonfarm payrolls rose by 199,000 in December, well below the 422,000 estimate and the second month in a row of a report that was well below consensus. However, the unemployment rate fell to 3.9% at a time when employment openings far exceed those looking for work, reflecting a rapidly tightening jobs market.

Hatzius thinks those converging factors will cause the Fed not only to raise rates a full percentage point, or 100 basis points, this year but also to start shrinking the size of its $8.8 trillion balance sheet. He pointed specifically to a statement last week from San Francisco Fed President Mary Daly, who said she could see the Fed starting to shed some assets after the first or second hike.
“We are therefore pulling forward our runoff forecast from December to July, with risks tilted to the even earlier side,” Hatzius wrote. “With inflation probably still far above target at that point, we no longer think that the start to runoff will substitute for a quarterly rate hike.”
Up until a few months ago, the Fed had been buying $120 billion a month in Treasurys and mortgage-backed securities. As of January, those purchases are being sliced in half and are likely to be phased out completely in March.
The asset purchases helped hold interest rates low and kept financial markets running smoothly, underpinning a nearly 27% gain in the S&P 500 for 2021.
The Fed most likely will allow a passive runoff of the balance sheet, by allowing some of the proceeds from its maturing bonds to roll off each month while reinvesting the rest. The process has been nicknamed “quantitative tightening,” or the opposite of the quantitative easing used to describe the massive balance sheet expansion of the past two years.
Goldman’s forecast is in line with market pricing, which sees a nearly 80% chance of the first pandemic-era rate hike coming in March and close to a 50-50 probability of a fourth increase by December, according to the CME’s FedWatch Tool. Traders in the fed funds futures market even see a non-negligible 22.7% probability of a fifth hike this year.
Still, markets only see the funds rate rising to 2.04% by the end of 2026, below the 2.5% top reached in the last tightening cycle that ended in 2018.
Markets have reacted to the prospects of a tighter Fed, with government bond yields surging higher. The benchmark 10-year Treasury note most recently yielded around 1.77%, nearly 30 basis points higher than a month ago.

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Traders work on the floor of the New York Stock Exchange (NYSE) on January 07, 2022 in New York City.
Spencer Platt | Getty Images

Stock futures were lower in overnight trading Sunday after a rocky start to 2022 for equity markets as interest rates rise.
Futures on the Dow Jones Industrial Average shed about 85 points, or 0.2%. S&P 500 futures dipped 0.2% and Nasdaq 100 futures lost 0.1%.

The three major stock averages all fell in the first week of the year. The S&P 500 slid 0.4% on Friday for its first four-day losing streak since September. The Nasdaq Composite dropped 0.9%, also posting four straight losing days. The Dow Jones Industrial Average lost 4.81 points.
Stocks, particularly high-growth names, have struggled as interest rates tick higher. The 10-year Treasury yield topped 1.8% on Friday, on a run after closing 2021 at the 1.51% level.
“As we kick-started 2022 this week, trading attention fell on a definitive rotation into value and pro-cyclical stocks and out of growth as investors digested a sharply higher rate environment,” Goldman Sachs’ Chris Hussey said in a Friday note.
The rising rates come as the Federal Reserve signaled it could dial back its easy monetary policy more aggressively than some expected. Minutes from the Fed’s December meeting released Wednesday showed the central bank is planning to shrink its balance sheet in addition to hiking rates.
Investors are awaiting key inflation reports in the week ahead. The consumer price index is set for release Wednesday and the producer price index is slated for Thursday.

Federal Chair Jerome Powell is scheduled to testify Tuesday at his nomination hearing before a Senate panel, while the hearing on Fed Governor Lael Brainard’s nomination to the post of vice chair is set for Thursday.
Delta Air Lines reports earnings Thursday and financial heavyweights JPMorgan Chase, Citigroup and Wells Fargo release quarterly results Friday.

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THE COUNTRIES of East and South-East Asia are renowned, even envied, for reshaping global supply chains. Less well appreciated is the extent to which they have redrawn the map of global capital flows. After a buying spree over the past decade or so, the region’s ten biggest economies now hold nearly $28trn in foreign financial assets, more than three times the amount in 2005 and equivalent to a fifth of global assets held by foreigners. Once-staid institutions that are little-known in the West—from obscure Japanese banks and Taiwanese insurers to South Korean pension funds—now wield heft in markets for assets ranging from collateralised-loan obligations (CLOs) in America to high-speed rail lines in Britain.East Asia has long been recognised as a contributor to the global “savings glut”, a concept popularised by Ben Bernanke, then a governor at the Federal Reserve, in 2005. The scale of Asia’s foreign holdings has only grown since, as the region has become richer and older. The Economist has looked at figures for the gross foreign financial assets for ten East and South-East Asian economies. We define these as total gross foreign assets excluding foreign direct investment by multinationals; our measure captures investment portfolios and bank lending, among other things. The combined foreign financial assets of our ten countries rose from around $8trn in 2005 to nearly $28trn in 2020, increasing the region’s share in global foreign-held financial assets by five percentage points (see chart 1).The composition of Asia’s savings hoard has also changed, strikingly so in some places. When Mr Bernanke conducted his analysis foreign-exchange reserves held by governments and central banks in our set of ten economies accounted for about half of a country’s foreign financial assets, on average. These had been stockpiled after the Asian financial crisis of 1997-98 as a bulwark against future currency collapse, and were held in safe, liquid assets. The average share of reserves has now fallen to nearer a third. Meanwhile, two-thirds of the stockpile now reflects an explosion in portfolio and other financial flows, as institutional investors in the region have hunted for yield (see chart 2).The shift is drawing the attention of financial watchdogs. In December the Bank for International Settlements (BIS), a club of central banks, concluded that Asian institutional investors had contributed to dollar funding stress in March 2020, as covid-19 first began to spread and markets panicked. Yet much about these financial interlinkages, and the risks associated with them, is still poorly understood.Our sample of countries can be split into three camps. The wealthiest handful—Hong Kong, Japan and Singapore—hold significant foreign-exchange reserves, but their hoards of other financial assets are between five and eight times larger. Their holdings are now mature, and slower-growing by regional standards.A bigger shift has taken place in South Korea and Taiwan. In 2005 almost half of Taiwan’s foreign financial assets, and two-thirds of Korea’s, took the form of reserves. Although reserve holdings have since more than doubled for both countries, portfolio and other assets have expanded at a far more rapid clip. Korea and Taiwan now own $1.5trn and $2.1trn in foreign financial assets, respectively, less than a third of which is held in reserves. In Malaysia, too, non-reserve financial assets now outweigh reserves two-to-one. By contrast, for a third set of countries, which includes China, Indonesia, the Philippines and Thailand, reserves still retain a large share.The growth in foreign financial holdings has gone hand-in-hand with the transformation of conservative institutional investors into big players in distant corners of financial markets. A prime example is Norinchukin Bank, an agricultural co-operative based in Japan. It holds some ¥4.8trn ($42bn) in CLOs, securities made up of a portfolio of loans, most of which are denominated in dollars. Before it slowed purchases in 2019, it was widely considered the largest buyer of CLOs in America.Taiwan’s insurers, such as Cathay Life Insurance and Fubon Life Insurance, have become influential institutions in a number of international markets. Their total assets have nearly tripled over the past decade. And more of them are now held overseas. By the end of 2020 almost 60% of their assets were comprised of foreign investments, up from 30% in 2010.Such institutional investment is now so widespread that Formosa bonds, foreign-currency bonds issued in Taiwan by a range of global firms and governments, have exploded since the securities were designated as domestic rather than foreign debt, allowing insurers to skirt regulatory limits on foreign-security ownership. By the end of 2021 the outstanding value of dollar Formosa bonds alone was $195bn, compared with $84bn six years earlier.South Korea’s National Pension Service has also sought more overseas exposure, announcing a flurry of global ventures. Foreign assets made up 37% of the pension fund last year, nearly double the share in 2013, and the firm aims to increase that to 50% by 2024. The strategy is to chase returns not only abroad but also in less-liquid asset classes, before the fund’s benefit payouts start to increase in the early 2040s and its revenue surplus turns to a deficit.Malaysia’s Employees Provident Fund (EPF), which manages mandatory pension investments for the country’s private-sector employees, provides another illustration of Asian institutions’ foreign reach. Last year it launched what it called the world’s largest sharia private-equity fund, with BlackRock, HarbourVest Partners and Partners Group each managing a third of the allotted $600m. The EPF’s foreign assets have also climbed from 29% of the total in mid-2017 to 37% in mid-2021. The result of all this activity is that Asian institutional investors have become enormous swing buyers in certain markets. “They’re disproportionately large in Australia,” says Martin Whetton of Commonwealth Bank of Australia. The country, he says, is the third-largest location of assets for Japanese life insurers, and tends to make up about 10-15% of their portfolios. Mr Whetton points out that purchases of Australian dollar assets in North Asia are large enough to shift the country’s cross-currency basis (the premium traders pay to temporarily exchange currencies).Some institutions have made promises of guaranteed payouts to clients and, as interest rates have sunk to rock-bottom levels, have had little option but to hunt for yield in less highly rated or more illiquid asset classes. Industry insiders note that insurers in the region have moved increasingly into emerging-market debt and higher-yielding Asian bonds. Private, illiquid assets have also become more popular. Asian investors have long been drawn to private equity and property, says Anish Butani of bfinance, an investment consultancy. Now “we’re really seeing a surge of activity in infrastructure and private debt”.To observers such as the BIS and the IMF, all this signifies greater financial risks than when more holdings took the form of safe, highly liquid reserve assets. Cross-border financial flows can be volatile and flighty, transmitting stress from one part of the world to another, and posing risks both to the buyers and the markets in which they participate. Although many institutions must pay clients in their domestic currencies, few appear to hedge their entire foreign-currency exposure. Private assets are harder to sell quickly at reliable prices, potentially posing liquidity problems should investors need to pull out. Precise, coherent figures on the composition, riskiness and liquidity of holdings are still hard to get hold of, making it difficult to gauge the overall picture.But understanding what’s going on could become more important, if China follows the path of East Asian economies. Its reserves of more than $3trn dwarf its other financial holdings. A shifting composition of foreign assets is not a matter of destiny, and would require some loosening of China’s capital controls. But even a marginal move towards more portfolio investment could produce huge flows of capital. “Chinese insurers have a lot of interest in investing overseas,” says Rick Wei of JPMorgan Asset Management. “They want to diversify their holdings, increase returns and match their liabilities with longer-term assets.” Even after more than a decade of rampant growth in Asia’s private foreign assets, more may be yet to come. For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

In this photo illustration the Discovery Channel logo of an US television network is seen on a smartphone and a pc screen.
Pavlo Gonchar | LightRocket | Getty Images

Check out the companies making headlines in midday trading.
GameStop – Shares of the video game retailer jumped 7.3% after news that the company is planning to create a marketplace for nonfungible tokens, or NFTs. At its session high, the speculative name jumped more than 20% on the day.

T-Mobile – The company saw its stock fall 5% after it reported postpaid net customer additions of 844,000 in the fourth quarter and about 2.9 million total in 2021. That came in lower than the StreetAccount consensus expectations of 867,900 in the fourth quarter.
DraftKings – Shares of the sports betting company added 5.6% ahead of the launch of legal mobile sports betting in New York state on Saturday.
Discovery – The media stock soared 16.9% after Bank of America upgraded Discovery to buy. The pending merger with Warner Media could create a true rival to Netflix and Disney+ in the streaming space, Bank of America said.
The New York Times – Shares tumbled 10.7% after the newspaper publisher announced a deal to buy sports news site The Athletic for $550 million. The transaction is expected to close in the first quarter of 2022.
Delta Air Lines – Shares gained 3.5% after Bank of America upgraded Delta to a buy rating. The firm cited a recovery in business travel as underlying its bull thesis on the stock. “We expect each successive variant to have less of an impact on consumers’ willingness to travel and return to office plans, which could result in a faster recovery in corporate demand than initially expected in 1H22,” the firm said. 

Texas Instruments – The stock fell 3.9% after Citi downgraded the company to a buy rating from neutral. “We believe its margins will decline due to increasing depreciation and the acquisition of a fab,” Citi said.
Kohl’s – Shares of the retailer fell 1.7% after UBS downgraded Kohl’s to sell from neutral. The bank said that inflation and less government stimulus could cause Kohl’s to miss earnings expectations in 2022.
Abercrombie & Fitch – Abercrombie shares dropped 3.3% after UBS downgraded the retail stock to a neutral rating from buy. “We think macro forces result in slowing growth, making it hard for the stock to re-rate,” the firm said.
Chewy — Shares of the pet supply retailer dropped 8.3% after Piper Sandler downgraded Chewy to neutral from overweight. The Wall Street firm said in its downgrade that it sees sales and margin headwinds for Chewy.
Clover Health — Shares fell 5.7% after Credit Suisse downgraded the stock to underperform from neutral. “Our view is predicated on the company continuing to need to raise capital moving forward, a lack of clarity on significantly improving their medical loss ratio (MLR) to reduce cash burn, and an overall re-rating across the tech-enabled MCO sector,” the firm said.
Starbucks — The worldwide coffee chain ticked 3.2% lower following a downgrade to sector perform from outperform at RBC Capital Markets. The Wall Street firm said in its downgrade of Starbucks that it sees more compelling risk/reward.
— CNBC’s Yun Li, Maggie Fitzgerald, Pippa Stevens and Jesse Pound contributed reporting

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A person wearing a protective mask exits from a GameStop Corp. store at a mall in San Diego, California, on Thursday, April 22, 2021.
Bing Guan | Bloomberg | Getty Images

GameStop shares jumped on Friday after news that the video game retailer is planning to create a marketplace for nonfungible tokens, or NFTs.
The speculative stock ended the day 7.3% higher after surging more than 20% earlier in the day. Its shares are still off more than 70% from their 52-week high.

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The Wall Street Journal reported Thursday after the bell GameStop’s potential move into the NFT space. One source close to the situation confirmed the plans to CNBC, saying it has been in the works for months.
GameStop also plans to establish cryptocurrency partnerships to create games and items for the marketplace, the source said.
“GameStop is in a very unique position, because a lot of these NFT projects are starting to add gaming utility behind the NFTs themselves,” said Adam Hollander, an NFT investor and creator of the “Hungry Wolves” NFT collection. “GameStop is well positioned, in my opinion, to be able to capitalize on that they have hundreds of millions of people that play video games that least recognize GameStop as a credible brand.”
The company has been quietly hiring talent in blockchain and crypto with more than two dozen members on the team now, the source said.
NFTs use a technology that allows proof of ownership of digital goods to be stored on a blockchain, often ethereum. It has been one of the most-hyped sectors in technology. OpenSea, the best-known NFT marketplace, was recently valued at $13.3 billion by investors.

GameStop’s marketplace will focus on virtual video game goods such as character outfits and weapons, according to the Journal report.
In January 2021, retail traders collaborated on Reddit’s WallStreetBets’ forum, aiming to bid up GameStop’s shares, which were heavily shorted by hedge funds. The retail buying triggered massive short covering among hedge funds that fueled the rally even further.
The stock ended 2021 up 687% after a year of wild trading. Some investors were disappointed by the lack of concrete turnaround plans for its e-commerce transition, which is led by activist investor and Chewy co-founder Ryan Cohen.
— CNBC’s Frank Holland contributed reporting.
Correction: Ethereum is a blockchain. An earlier version misspelled its name.

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The bank reminded employees in a memo sent Friday about its policy, first disclosed in October, that they must be “fully vaccinated as a condition of employment.” At the time, the bank said that employees had to submit proof of vaccination by Jan. 14.
Those who haven’t complied by next week will be put on unpaid leave, with their last day of employment being Jan. 31, according to the memo, which was first reported by Bloomberg. A spokeswoman for the New York-based bank declined to comment.
More than 90% of employees are compliant with the vaccine mandate, and that figure is rising as the deadline nears, according to a person with knowledge of the matter.

Pedestrians cross a road in front of a Citigroup Citibank branch in Sydney, Australia, on June 1, 2018.
Brendon Thorne | Bloomberg | Getty Images

Citigroup will be the first major Wall Street institution to enforce a vaccine mandate by terminating noncompliant workers by the end of this month.
The bank reminded employees in a memo sent Friday about its policy, first disclosed in October, that they must be “fully vaccinated as a condition of employment.” At the time, the bank said that employees had to submit proof of vaccination by Jan. 14.

Those who haven’t complied by next week will be put on unpaid leave, with their last day of employment being Jan. 31, according to the memo, which was first reported by Bloomberg. A spokeswoman for the New York-based bank declined to comment.
Citigroup, the third biggest U.S. bank by assets and a major player in fixed income markets, has had the most aggressive vaccine policy among Wall Street firms. Rival banks including JPMorgan Chase and Goldman Sachs have so far stopped short of terminating unvaccinated employees.

Citigroup, led by CEO Jane Fraser since March of last year, said it made the decision because as a government contractor, it needed to comply with President Joe Biden’s executive order on vaccines. The bank also said that enforcing the mandate would help ensure the safety of employees who return to office work.
More than 90% of employees are compliant with the vaccine mandate, and that figure is rising as the deadline nears, according to a person with knowledge of the matter. The bank had 220,000 employees as of late last year, although the policy applies only to U.S. based staff.
While some technology companies have embraced remote work as a permanent model, Wall Street CEOs including JPMorgan’s Jamie Dimon and Morgan Stanley’s James Gorman have been vocal about needing to pull workers back.
But the spread of the omicron variant of Covid-19 has forced companies to suspend back-to-work plans yet again, making it the latest disruption caused by the pandemic.

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