Stephen Alpher is CoinDesk's managing editor for Markets. He holds BTC above CoinDesk’s disclosure threshold of $1,000.
Across the globe, 2023 was yet another year of significant challenges, from the terrible ongoing war and violence in the Middle East and Ukraine to mounting terrorist activity and growing geopolitical tensions, importantly with China. Almost all nations felt the effects last year of global economic uncertainty, including higher energy and food prices, inflation rates and volatile markets.
Throughout the year, we demonstrated the power of our investment philosophy and guiding principles, as well as the value of being there for clients — as we always are — in both good times and bad times. The result was continued growth broadly across the firm.
First, our work has very real human impact. While JPMorgan Chase stock is owned by large institutions, pension plans, mutual funds and directly by single investors, in almost all cases the ultimate beneficiaries are individuals in our communities. More than 100 million people in the United States own stocks; many, in one way or another, own JPMorgan Chase stock.
But they were hardly alone. In 2003, some 215 deals were announced among U.S. commercial banks and bank holding companies for a total value of $66 billion, according to Thomson Financial, which tracks merger data. Our extensive community outreach efforts, including diversity, equity and inclusion What we learned: A five-point action plan to move forward on the climate challenge Powering economic growth in FloridaProtecting the essential role of market making A bank’s strength: Providing flexible capitalThe secret sauce of leadership Coalescing the Western world — A uniquely American taskProviding strong leadership globally and effective policymaking domestically Manager’s Journal:"A Politician's...
While we are investing more money in our AI capabilities, many of these projects pay for themselves. Over time, we anticipate that our use of AI has the potential to augment virtually every job, as well as impact our workforce composition. It may reduce certain job categories or roles, but it may create others as well. As we have in the past, we will aggressively retrain and redeploy our talent to make sure we are taking care of our employees if they are affected by this trend.
You may already be aware that there are bad actors using AI to try to infiltrate companies’ systems to steal money and intellectual property or simply to cause disruption and damage. For our part, we incorporate AI into our toolset to counter these threats and proactively detect and mitigate their efforts.Getting our technology to the cloud — whether the public cloud or the private cloud — is essential to fully maximize all of our capabilities, including the power of our data.
Fortunately, we were very familiar and comfortable with all of the assets we were acquiring from First Republic. What we didn’t take on was First Republic’s excessive interest rate exposure — one of the reasons it failed — which we effectively hedged within days of the acquisition. Therefore, we are prepared for a very broad range of interest rates, from 2% to 8% or even more, with equally wide-ranging economic outcomes — from strong economic growth with moderate inflation to a recession with inflation; i.e., stagflation. Economically, the worst-case scenario would be stagflation, which would not only come with higher interest rates but also with higher credit losses, lower business volumes and more difficult markets.
Many of these countries are quite complex with different laws, customs and regulations. We are occasionally asked why we bank certain companies and even certain countries, particularly when countries have some laws and customs that are counter to many of the values held in the United States. Here’s why:And when it does, we salute. Wherever we do business, we follow the law of the United States, as it applies in that country , in all respects.
We’ve nearly completed our five-year, $30 billion Racial Equity Commitment — it will now become a permanent part of our business. We believe in the values of democracy, including freedom of speech and expression, and are staunchly against discrimination and hate. We have not turned away — and will not turn away — customers because of their political or religious affiliations nor would we tell customers how they should spend their money.
To find a way forward, we sought input from diverse stakeholders in pursuit of a North Star. In Scottsdale and in discussions with clients across industries about what’s needed to achieve a low-carbon economy, these five action steps and reforms were top of mind:Policy that promotes favorable economic conditions to make the transition viable is a critical first step for clients.
We bank over 50 of Florida’s regional, midsized and community banks, helping them play an essential role in maintaining the state’s economy and serve local communities.At the end of 2023, balances for loans extended to Florida’s small businesses totaled more than $1.2 billion — funds being used to help those businesses scale and grow, contribute to the economy and create local jobs.Our support to consumer banking needs:In 2023, we supported more than 6.
This is not about JPMorgan Chase — we believe we can manage through whatever is thrown our way. This is about the impact on all parts of the system — from smaller banks to larger regional banks that may not have the resources to handle all of these regulatory requirements. It’s also about the effect on the financial markets and the economy from the rapidly growing shadow banking system, as well as the ultimate impact on the customers, clients and communities we serve.
The whole process, including the Basel III endgame, could be much more productive, streamlined, economical, efficient and safe. Without real analysis of expected outcomes, additional regulation will likely reduce the number of banks offering certain services and increase costs for all market participants and activity, including loans, market making and hedging . And new rules might even increase consolidation as companies race to achieve economies of scale in certain products and services.
Market participants are not “Wall Street.” They are large and small, mainly sophisticated, global investors representing retirees, veterans, individuals, unions, federal workers and others. They all benefit from our efficient, low-cost and transparent markets. I would also like our shareholders to know that our market making is backed by approximately $7 billion in support expenses, including over $2 billion in technology spend alone each year. This investment allows us to maintain global trading systems and constantly improve upon risk management and efficiency.
You can see that our actual performance under extreme stress isn’t even close to the hypothetical losses of the stress test. In addition, more liquidity, not less liquidity, will be needed to maintain market stability. Large banks keep an inventory of securities they can deploy in times of stress to help soothe markets; however, with the implementation of new regulations, banks now hold 70% as much inventory in securities as they did before the 2008 financial crisis, while the total size of the market has almost tripled.
There are good reasons for private markets, and some good outcomes result from them. For example, companies can stay private longer if they wish and raise more and different types of capital without going to the public markets. However, taking a wider view, I fear we may be driving companies from the public markets.
Asset managers and institutional investors may rely on a variety of information sources to support their valuation decision-making process. While data and recommendations may form pieces of the information mosaic, their votes should ultimately be based on an independent application of their own voting guidelines and policies.
The firm has significantly expanded the representation of portfolio managers on its North American Proxy Committee in an effort to increase the diversity of viewpoints represented on the committee.
New financial products that grow extremely rapidly often become an area of unexpected risk in the markets. Frequently, the weaknesses of new products, in this case private credit loans, may only be seen and exposed in bad markets, which private credit loans have not yet faced.
To get people to think like decision makers and take a strong point of view, we like to ask, “What would you do if you were king or queen for a day?” It helps shift the direction to individual decision making. We also ask questions like, “What would you wish for if you knew X was going to happen?” . Decision making takes a mix of courage, grit and guts.
Finally, your vision needs to be clear, coherent and consistent. Within an organization, people very quickly pick up the pattern of management saying one thing but doing another. Because if words and actions are inconsistent , confidence in leadership will be eroded.Heart matters. And it makes a difference when people know and see that you actually care. One example: Many years ago when I was new to JPMorgan Chase, I learned that the company’s security guards had been outsourced — to save money.
If you read the newspaper from virtually any day of any year since World War II, there is abundant coverage on wars — hot and cold — inflation, recession, polarized politics, terrorist attacks, migration and starvation. As appalling as these events have been, the world was generally on a path to becoming stronger and safer. When terrible events happen, we tend to overestimate the effect they will have on the global economy.
Strategy by its nature must be comprehensive. In the rest of this section, I try to answer the question: What must we do to ensure that the world stays safe, not only for America but for freedom and democracy? A comprehensive strategy entails four important pillars, and we must succeed at each:Deepen focus and resolve on addressing our most pressing challenges.
In perilous periods of history when our allies and other democracies were under serious assault, great American leaders have inspired the American people — through words and actions — to stand up to help and defend them. Staying on the sidelines during battles of autocracy and democracy, between dictatorship and freedom, is simply not an option for America today. Ukraine is the front line of democracy.
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