The Australian Financial Review (AFR) is today hosting a 'Wealth Summit' of eminent figures in the business and investing world.
Here are some of the highlights from the morning session:
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Inflation ahead: Goldman Sachs CEO
The chief executive of the famous US investment bank Goldman Sachs, David Solomon, joined the Wealth Summit earlier today. Mr Solomon spoke at length about that dreaded topic of discussion of late – inflation. He told the summit that there are signs that inflation is a threat in many countries that is growing "maybe more quickly than people are expecting".
Solomon told the Summit that "I do think we're going to see some inflation… The question is how much, at what pace, how quickly, what are the impacts: that's much harder to predict". Interestingly, he also poured cold water on the idea of working remotely. That's something that (as we all know) has grown immensely in popularity thanks to the pandemic. Solomon thinks that the office offers an environment that encourages spontaneity, something he thinks is not so prevalent in a working-from-home environment.
Overall though, Mr Solomon is bullish on both economic growth and stock markets going forward: "We have an environment that is constructive for economic activity, for asset prices and it's quite bullish if you are looking at economic activity".
Allianz economist: Disconnect between markets and economy
Solomon's bullishness isn't shared by the chief economist of the Greman insurance giant Allianz though. The AFR reports that Dr Mohamed El-Erian has identified what he sees as a "massive disconnect between financial markets and the economy". He says this can lead to "market accidents". One such 'accident' he discusses is the Nasdaq Composite (INDEXNASDAQ: .IXIC) correction over the past month: "The NASDAQ entered correction territory. There is excessive risk-taking. No one wants to make mistakes and they can happen quickly".
Dr El-Erian also stated that there are four ways to describe the state of the economy and markets right now: "dispersion, debt and disconnect and inequality". It seems Solomon and El-Erian are playing good cop, bad cop.
Peter Costello calls monetary policy "morphine"
Former Treasurer and chair of the Future Fund, Peter Costello, also spoke at the summit. He described the current Reserve Bank of Australia's monetary policy as "morphine", noting that rates are at near-zero levels and are backed up by a large quantitative easing (QE) program:
"These rates are emergency rates, they are for emergencies", he told the Summit. He hopes rates will be lifted much earlier than the 2024 date the RBA has set, saying "We'd hope patients aren't on morphine when they recover… We want the patient, the economic patient, out of the emergency room".
