Jamie Dimon, Cathie Wood in Where’s at Risk

  • Wall Street is concerned about creating stress signals in the markets and the financial system.
  • Resource theft, economic tensions and dysfunction in the UK are raising red flags.
  • Here’s what Jamie Dimon, Cathie Wood, and 5 other experts say about where things could break.

Concerns that markets are close to breaking point are gaining traction on Wall Street, and influential investors and pundits like Jamie Dimon, Cathie Wood and Larry Summers have indicated where an explosion in the financial system could go.

Signs of stress in the system are piling up, from whiplash moves in assets, to growing threats to economic stability, to overwhelming fears of distress in major banks like Credit Suisse. Political turmoil in the UK has laid bare the risks in government bonds and pensions, generally seen as safe havens.

“We are seeing more standard deviation moves in things like the Swedish krona, Treasuries, oil, silver, like every other day. These are not healthy moves,” Alpha Theory Advisors’ Benjamin Dunn told CNBC.

Many strategists blame the Federal Reserve’s aggressive campaign to cool inflation by raising interest rates at the fastest pace ever. This has pushed bond yields and the dollar to a 20-year high, causing economic tensions that are spreading across the markets.

Here’s where 7 top experts think something could break:

Jamie Dimon, CEO of JP Morgan: Credit markets, ETFs

“You have seen it with the gilt markets here. You see a lack of liquidity in many markets … It will happen,” Dimon said at a conference in London.

“The most likely place you’ll see more than a crack, and maybe a little more panic, is in the credit markets. And it could be ETFs, it could be a country, it could be something you don’t see suspicious.

“If you make a list of all the previous crises, sitting here we would not have predicted where they came from, although I think you could predict right now that it will probably happen. So if I were out there, I would be very cautious.”

Scott Minerd, Global CIO of Guggenheim Partners: ActionsAndmerger markets

“They’re going to push until something breaks,” Minerd said recently of the Fed.

“I think the breakout will probably come from, you know, stock prices, but it could come in other places – it could come in emerging markets.

“Eventually, this will end in tears.”

Cathie Wood, head of Ark Invest: Financial services sector

“There are also signs of distress in the financial services sector. We have seen the credit default swaps of money center banks double and triple, and you know, in Europe they are at an all-time high,” Wood told CNBC.

“So there are stresses and strains in the financial system that I believe started to manifest, first with the UK LDI crisis. And the reason this is happening is that we are experiencing a major financial shock.”

Mohamed El-Erian, Chief Economic Advisor of Allianz: Zombie company, earnings

“Zombie companies are finding it much harder to refinance. And if they can get the refinance, the cost of refinancing makes the numbers look completely different,” El-Erian told CNBC last week, referring to overly indebted companies getting along. .

“So you can go to various investors who have exercised overlever, this will be a problem.”

“The Fed is so late that it will probably stop something on the way to reducing inflation,” El-Erian told CNBC in a separate interview.

“The most likely victim is economic growth. I think the market is starting to recognize that the risk of recession, and what it does to earnings, is a problem.”

Larry Summers, former US Treasury Secretary: Global economy

“What happened in the UK – part of it is a self-inflicted wound, but part of it is tremors from what is happening in the global system,” he said at the Institute of International Finance’s annual meeting on Friday.

“And when you have tremors, there aren’t always earthquakes, but you should probably think about earthquake protection.”

Ed Yardeni, president of Yardeni Research: Emerging markets

“I think it’s already breaking. What is breaking is the rising dollar,” Yardeni told Bloomberg, also pointing to the Fed’s rate hike campaign.

“A rising dollar has been associated in the past with creating financial crises on a global basis.

“We need to have a global perspective on all of this, and this tight monetary policy here is having a huge impact on the rest of the world, especially in emerging markets.”

Kamakshya Trivedi, Head of Global FX Research at Goldman Sachs: Emerging markets

“In some of the most vulnerable pockets of emerging markets, where there is a substantial amount of dollar-denominated debt, there is already a debt crisis,” Trivedi said in a podcast.

“That’s where you have to look for the real debt problems that are starting to happen.”

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