Bluford (Blu) Putnam has served as Managing Director and Chief Economist of CME Group since May 2011. Ahead of the Global Financial Leadership Conference, which takes place Nov. 18-20, Mr. Putnam shares his insight about the global economy and the Federal Reserve’s quantitative easing program. He also offers a forecast for global commodities in 2014.
1. What does the forecast look like for the U.S. economy?
The U.S. is 2% real GDP economy, trying to grow a little faster, yet hindered by the government. Even so, the U.S. economy appears to have survived the government shutdown and debt ceiling debate, although concerns over these same issues could arise again early in 2014 as fiscal policy remains mired in partisan politics and brinksmanship. On the monetary policy side, the Federal Reserve seems likely to move to taper its asset purchase programs sooner rather than later. At the same time that quantitative easing is curtailed, the Fed is likely to assure markets that a near-zero target federal funds rate is here to stay for an extended period of time. (read more…)
Karen B. Peetz, president of BNY Mellon, is no stranger to crises of confidence. She served as a member of Penn State’s Board of Trustees and later as the board’s chairwoman when the university had to deal with the child sex abuse scandal of its storied football team led by longtime coach Joe Paterno. “Somebody had to step up and say we accept responsibility,” she told attendees of the SIFMA Annual Meeting Tuesday.
Peetz sees parallels between Penn State’s scandal and the state of the financial markets industry. While BNY Mellon was not directly involved in the activity that led to the financial crisis, the bank had “protesters marching on our building … handing out leaflets that said we are corrupting the world,” she said. Five years after the crisis hit, the industry is still dealing with the fallout.
“We lost the trust of the investing public, of the taxpayers, of the regulators,” Peetz said. (read more…)
Paul E. Purcell, chairman, CEO and president of Robert W. Baird & Co., sees a lot of positive signs in the financial markets industry. U.S. banks are better capitalized than their European counterparts. Individual investors have come back to the bullish stock market. Robust energy markets are leading to the “re-industrialization” of America, he noted Tuesday during a Q&A at the SIFMA Annual Meeting.
“We have the deepest and most efficient capital markets in the world,” he said.
Yet the aftermath of the financial crisis has hurt the industry’s creditability with the public. “We have to clean up our act and get out of the newspapers,” he said. “We need to explain the good work that we do.”
Part of the solution is for financial firms to be “more client-driven, less product-driven,” Purcell said. He worries that high frequency trading has diminished confidence individual investors have in the stock market. He also suggested the industry should continue to increase capital requirements and de-risk. (read more…)
Research firm Cerulli Associates forecasts that more than 25,000 financial advisers will retire or leave the industry by 2017. How the industry copes with that lost was a hot topic of a breakout session about individual investor advice Tuesday at the SIFMA Annual Meeting.
“I don’t think we’re doing nearly enough as an industry to address this problem,” said John Taft, CEO of RBC Wealth Management-U.S. Taft said that RBC has changed the compensation of its advisers to incentivize them to build succession plans and bring on younger team members. He notes that even clients are asking advisers about their succession planing.
Kent Christian of Wells Fargo Advisors said the company is focused on its training program to attract and retain new advisers, pairing them with experienced hands. “Teaming is the best way to give young advisers a shot at success,” he said.
The fate of a fiduciary standard for financial advisers will have a dramatic effect on the advice market for individual investors. (read more…)
BlackRock CEO Larry Fink was a featured speaker at the SIFMA Annual Meeting Tuesday in Manhattan. During his appearance, Fink shared numerous nuggets of wisdom with the audience, including these 10 key takeaways:
- If it wasn’t for Washington, the U.S. economy would be stronger and there would be more foreign investment in the U.S. “Our economy is based on principles … one of those principles is strong government. The dysfunction of Washington has created uncertainty that is playing out in the job market and capital expenditures.”
- On how history will view the Dodd-Frank Act: “Looking back at Sarbanes-Oxley, boy did we yell about that.” Sarbox slowed IPOs and foreign investment, but only for a short period of time. “We create a law. … We all adapt. … Everything with Dodd-Frank will work itself out. Does Dodd-Frank make society safer? Yes. … We’re better off.”
- Fed tapering – “I would begin tapering in December, but also make clear that rates will stay at or near 0% until 2016.”
- The growth countries of the future won’t be those with cheap labor.