8. DECENT WORK AND ECONOMIC GROWTH

Aussie multi-millionaire, Morgan Stanley CEO, James Gorman says US recession becoming more likely – Daily Mail

Written by Amanda

Aussie multi-millionaire, Morgan Stanley CEO, James Gorman says US recession becoming more likely  Daily Mail


Morgan Stanley CEO warns a recession is on the way as inflation spikes in the US

  • American headline inflation rate in May hit a four-decade high of 8.6 per cent
  • Melbourne’s James Morgan, Morgan Stanley CEO, said a recession is 50/50
  • Australian share market suffering worst dive since March 2020 on inflation fears 

One of the most high-powered Aussie executives in corporate America says the threat to the world’s biggest economy has grown significantly as the US inflation rate soars.

James P. Gorman, the richly-paid CEO of billion-dollar investment bank Morgan Stanley, revised his predictions of a recession saying it is far more likely than he’d previously predicted.

The Australian share market suffered its worst plunge since March 2020 on Tuesday as the steepest American inflation in four decades spooked investors.

James P. Gorman, the richly-paid Aussie CEO of billion-dollar investment bank Morgan Stanley, reckons a recession in the world's biggest economy is a 50/50 proposition (Pictured, Mr Gorman with his wife Pendleton Dedman)

James P. Gorman, the richly-paid Aussie CEO of billion-dollar investment bank Morgan Stanley, reckons a recession in the world’s biggest economy is a 50/50 proposition (Pictured, Mr Gorman with his wife Pendleton Dedman)

James Gorman said while Morgan Stanley was secure amidst current economic turmoil, some institutions would be 'potentially fatally damaged' (Pictured, Mr Gorman in Switzerland in 2020)

James Gorman said while Morgan Stanley was secure amidst current economic turmoil, some institutions would be ‘potentially fatally damaged’ (Pictured, Mr Gorman in Switzerland in 2020)

The S&P/ASX200 tumbled 5.3 per cent in early trade with more than $110billion wiped off stocks, before recovering to close 3.84 per cent weaker.

The plunge followed a bad session on Wall Street amid fears an American inflation would see the US Federal Reserve raise interest rates and potentially spark a recession in the world’s biggest economy. 

US inflation hit 8.6 per cent, a 40-year high, sparking fears of a global recession.

Mr Gorman said there was a 50/50 chance the world’s biggest economy will slide into recession.

‘There was a legitimate recession risk. I used to think it was about 30 per cent. It’s probably more like 50 per cent now,’ he told Morgan Stanley’s US Financials, Payments and CRE conference.

Australia's S&P/ASX200 tumbled 5.3 per cent in early trade with more than $110 billion wiped off stocks, before recovering to close 3.84 per cent weaker

Australia’s S&P/ASX200 tumbled 5.3 per cent in early trade with more than $110 billion wiped off stocks, before recovering to close 3.84 per cent weaker

‘We’re in a brave new world right now. I don’t think anyone can accurately predict inflation one year from now,’ he said. 

He added that while Morgan Stanley was secure, some institutions would be ‘potentially fatally damaged’.

He expressed concern about ‘geopolitical uncertainty’ due to the state of the US economy, with ‘non-financial risks’ on issues including data stability and cyber risks. 

Mr Gorman, who is worth an estimated $200million and earned $50million in 2021 as Morgan Stanley’s boss, also said he was ‘pretty relaxed’ about the possibility of a recession and that the risk was not 100 per cent. 

He moved from Melbourne to the United States in the 1980s and worked his way up through corporate America to the prestigious role as head of the multinational investment bank in 2010.

He spoke out against the company’s 75,000 employees working from home last year, demanding they come back to the company’s headquarters.

‘If you can go into a restaurant in New York City, you can come into the office,’ Mr Gorman said. 

A US recession often means a recession in other major economies because of a tightening of financial conditions such as interest rate spikes, slowing trade and economic growth and a decline in confidence.

A US recession often means a recession in other major economies because of a tightening of financial conditions such as interest rate spikes, slowing trade and economic growth and a decline in confidence (Pictured, Morgan Stanley's New York headquarters)

A US recession often means a recession in other major economies because of a tightening of financial conditions such as interest rate spikes, slowing trade and economic growth and a decline in confidence (Pictured, Morgan Stanley’s New York headquarters)

Australia followed suit on several occasions in the 20th century but notably avoided slipping into recession the last two times the US economy did – in 2001 and from 2007-2009.

A recession is technically two consecutive quarters of a decline in Gross Domestic Product but it is frequently accompanied by several associated indicators including increased unemployment and a drop in real wages and consumer spending.

The last time the Australian economy experienced a recession was 1991.

Advertisement

Source: dailymail.co.uk

About the author

Amanda

Hi there, I am Amanda and I work as an editor at impactinvesting.ai;  if you are interested in my services, please reach me at amanda.impactinvesting.ai

Leave a Comment