\n
\n \u201c<\/span> Years ago, market strategists recalled, it was more common for banks to enforce what was known as \u2018the house view.\u2019\u201d<\/span>\n <\/p>\n<\/p><\/div>\n<\/p><\/div>\nA representative for JPMorgan didn\u2019t return a request for comment. <\/p>\n
In a post on X, the social-media site formerly known as Twitter, Tuttle Capital CEO Matthew Tuttle highlighted the contradiction with a guess at its cause and a smiley face. <\/p>\n
Tuttle told MarketWatch that disagreements among strategists working at the same big banks seem to be increasingly common on Wall Street. <\/p>\n
He\u2019s not wrong. Earlier this year, Bank of America\u2019s Savita Subramanian, head of U.S. equity and quantitative strategy, emerged as one of Wall Street\u2019s most optimistic U.S. equity bulls. At the same time, colleague Michael Hartnett, chief investment strategist at BofA Securities, told clients he expected the 2023 rally would soon end with another selloff. Their contradictory takes were highlighted in a report from Bloomberg News last month.<\/p>\n
Contradicting views on the economy have also surfaced at Goldman Sachs Group
\n GS,
\n +1.10%<\/bg-quote>,<\/span>
\n where Chief Economist Jan Hatzius assured clients last year that the U.S. economy would avoid a recession in 2023 in favor of a \u201csoft landing.\u201d Although Hatzius\u2019s call may ultimately prove prescient, he was contradicted last October by his boss, Goldman CEO David Solomon, who said during Saudi Arabia\u2019s Future Investment Initiative conference that the odds of a soft landing were just 35%, according to a Fortune report. <\/p>\nTo be sure, CEOs contradicting their own economists and analysts isn\u2019t uncommon on Wall Street. JPMorgan CEO Jamie Dimon made headlines last year for predicting an economic \u201churricane\u201d would batter the U.S. economy, a characterization that went beyond what JPMorgan\u2019s economists were forecasting. <\/p>\n
That\u2019s not the first time Dimon has contradicted his economics team, as MarketWatch reported back in 2018. <\/p>\n
\u201cI get a kick out of it because, to me, the only way a firm can avoid being wrong with their analysis is if one analyst tells you to buy, and the other tells you to sell,\u201d Tuttle told MarketWatch during a phone interview.<\/p>\n
Of course, the pressure to avoid being wrong has increased substantially across the industry, after two consecutive years when most investment-bank macro strategists and economists failed to anticipate critical trends in markets and the economy, according to several former Wall Street economists and strategists who spoke with MarketWatch. <\/p>\n
First, Wall Street failed to anticipate the inflationary shock that sent U.S. stocks and bonds tumbling in 2022. The S&P 500
\n SPX
\n finished 2022 with a drop of 19.4%, according to FactSet data, its worst calendar-year performance since 2008. The Bloomberg Barclays U.S. Aggregate Bond Index
\n U.K.:USAG,<\/span>
\n a benchmark for the U.S. bond market, endured its worst year since at least the 1970s, bond-market strategists said. <\/p>\nThen again, in 2023, they were taken by surprise by a torrid rebound rally in U.S. stocks fueled by the artificial-intelligence craze. So far, the Nasdaq-100
\n NDX
\n is up nearly 40% since the start of the year, according to FactSet data, as highflying megacap technology names have marched to record heights. The Invesco QQQ Trust Series 1
\n QQQ,<\/span>
\n a popular ETF that tracks the Nasdaq-100, has risen more than 36% since the start of the year to $363 per share. It was down 0.9% on Wednesday. <\/p>\n\u2018The clients only want to speak to analysts who are right\u2019<\/h2>\n
Recent performance isn\u2019t the only issue on Wall Street. There are other more entrenched factors putting pressure on the research businesses of the sell-side banks. <\/p>\n
Several former strategists at major U.S.- and Europe-based banks said the advent of Markets in Financial Instruments Directive 2014 \u2014 colloquially known as MIFID II \u2014- has heaped more pressure on investment-bank research departments since the European regulation essentially forced most big investment banks to charge for research separately instead of bundling it with trading fees. <\/p>\n
\u201cMIFID II is a killer,\u201d said Marvin Barth, former head of foreign-exchange and emerging-market macro strategy at Barclays PLC, during a call with MarketWatch. \u201cIt has undermined the whole business model.\u201d <\/p>\n
As a result, individual analysts are under more pressure to cultivate a following among clients, which typically means producing more research and ideas that clients can trade on, and potentially profit from \u2014 even if that sometimes resembles \u201cthrowing spaghetti at a wall to see what sticks,\u201d Barth said. <\/p>\n
\u201cThe pressure for sell-side analysts to be right has become more important than ever,\u201d said David Woo, a former top currency and fixed-income strategist at Bank of America who departed the bank in 2021. <\/p>\n
Woo cultivated a dedicated following among the bank\u2019s clients and across Wall Street thanks to calls like his 2016 contrarian prediction that Donald Trump would prevail over Hillary Clinton in the presidential election, when other strategists, famously, were caught off-guard.<\/p>\n
\u201cI guarantee you the clients only want to speak to analysts who are right,\u201d Woo said. \u201cThey don\u2019t care if the bank has a consistent view, a unified view. \u2026 They just want to know what this analyst thinks.\u201d<\/p>\n
Years ago, strategists recalled, it was more common for banks to enforce what was known as \u201cthe house view.\u201d But that model started to go out of style in the 1990s and 2000s. Several former sell-side strategists who spoke with MarketWatch credited Morgan Stanley as a progenitor of the model that is currently in vogue, where strategists and economists are allowed, or even encouraged, to disagree and debate, sometimes in front of an audience of clients. <\/p>\n
\u201cI remember back in the 1990s, I had a big debate with Barton Biggs \u2014 who has since passed away, and whom I had enormous respect for \u2014 over inflation,\u201d said Stephen Roach, a former chief economist and Asia chairman at Morgan Stanley. Roach is now a senior fellow at Yale University\u2019s Jackson Institute for Global Affairs.<\/p>\n
\u201cWe named the debate \u2018fire and ice.\u2019 \u2018Fire\u2019 being more inflation, and \u2018ice\u2019 being the risk of deflation,\u201d he added. <\/p>\n
\u201cIt had broad implications for interest rates and asset allocation. And we debated that actively in front of our clients, and even did a few \u2018fire and ice\u2019 roadshows,\u201d he said. <\/p>\n
Internecine debates aren\u2019t always cordial <\/h2>\n
Internecine debates like these aren\u2019t always cordial, which is perhaps unsurprising given the inherently competitive nature of Wall Street. Woo told MarketWatch that he remembers sometimes heated disagreements with a former Bank of America colleague, Ethan Harris, who was head of global economic research at BofA Securities.<\/p>\n
\u201cIt happened all the time. Me and Ethan Harris, we were always at loggerheads. We were completely at odds,\u201d Woo said. \u201cBut, in some sense, that is not a bad thing.\u201d<\/p>\n
Harris, who later left BofA, said he\u2019s not surprised to see more dissenting calls among strategists and economists as major turning points for U.S. economic growth, inflation and Federal Reserve policy loom. <\/p>\n
As for his professional disagreements with Woo, he said: \u201cI don\u2019t want to make this personal. Suffice to say that disagreements within sell-side shops aren\u2019t unusual.\u201d<\/p>\n
Representatives from Goldman, Bank of America and Morgan Stanley didn\u2019t return requests for comment. <\/p>\n<\/p><\/div>\n
Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"A pair of JPMorgan Chase & Co. strategists raised eyebrows earlier this month when they espoused seemingly contradictory market calls. It is the latest example of how strategists and economists working for the same Wall Street employer are increasingly comfortable offering conflicting views to clients and the media. During an interview with Bloomberg Surveillance last […]<\/p>\n","protected":false},"author":1,"featured_media":49673,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-49672","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\n
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