The CEO of JPMorgan’s giant investment bank isn’t all that surprised by the market reaction to Donald Trump’s election.
Daniel Pinto told Business Insider in a wide-ranging interview that the market reaction was the “mirror image of what he might do.”
He added that the moves were a “natural reaction,” and that the “reality will come later.”
“How much will taxes be cut? How much will really be spent on infrastructure? How much regulation is going to be rolled back? How much of everything? The market will then adjust,” he asked.
Here is the relevant passage from the interview:
Turner: What do you make of the post-Trump market reaction? In the equity market we’re hitting all-time highs, and in the bond market there has been a lot of movement, particularly for the assets most exposed to inflation.
Pinto: When you listen to his potential policies, the market reaction is pretty much the mirror image of what he might do. He is pro-US growth, so therefore what you have is higher interest rates and the potential for the Fed to be more aggressive than it would have been otherwise. The equity-market valuations we’re seeing aren’t low, but there could be additional momentum, particularly in financials. It is not such a surprise.
Turner: There is an argument that the market has priced in all of the best bits of his policies and ignored some of the potential negative consequences.
Pinto: If you watch TV, you’ll see that discussion repeatedly, but the market is not correcting. The market is pricing in tax rates going down, spending on infrastructure, some component of higher interest rates because someday down the line, when you have higher economic growth and an economy that is more or less operating near full employment, there will be a bigger Fed reaction. The curve is pricing in more hikes now than it was before the election. It’s a natural reaction, and the reality will come. How much will taxes be cut? How much will really be spent on infrastructure? How much regulation is going to be rolled back? How much of everything? The market will then adjust.
Read the whole interview here.