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We have always said that there is an extraordinary complacency that the market does not fully reflect the risks. This is something we saw in the bond yield movements last night. Is this a sign that risk has begun to be priced into the market? I have previously discussed this complacency in the context of asset valuation in the United States .
There are many factors. Quantitative easing policies, national budget deficits , global budget deficits, the risk of trade wars, and extremely complex geopolitical situations. I believe all those factors haven't been fully reflected in the market yet, but we can't know what will happen. I witnessed the market's reaction last night.
I'm not too worried about bond price fluctuations that happen in just one day. But if you look at the yields, they are currently much higher than they were before liberation. We've talked about yields rising, with some even predicting 5% or 7%. What is your assessment of that? At what yield level does it need to break through?
I don't know the exact answer . The important thing is that the way we run the company always prepares for every scenario. Regardless of what we think will happen, I just think there's a possibility of stagflation. There are too many things going on at the same time. I'm not saying that will happen.
But we must be prepared for that situation. I believe that global budget deficits are inflationary. The militarization of the world also causes inflation. The restructuring of trade supply chains is inflationary. And this isn't just a problem for America. The need for infrastructure investment also has an inflationary effect.
I know everyone is saying oil prices are low right now . This causes a deflationary trend . But with all the other factors at play, people might be surprised. I really enjoy reading economic history. So I looked back at what happened in 1972, 1974, 1980, 1982, and 1990. Unexpected shocks occurred. Most economists and forecasting models fail to identify those turning points.
These turning points are often driven by geopolitical complexities, which we cannot foresee. We've had the oil crisis of 1974. Therefore, we want to be prepared for any scenario to continue serving our customers consistently. He has also previously expressed concerns about public debt, and now there's a tax bill being voted on, which many believe will only make things worse.
What is his point of view ? The United States is currently in its largest peacetime trade box, accounting for nearly 7% of GDP. Regardless of how the tax bill is passed, I still think it's better to have certainty about the tax law. I want that to be resolved. However, at some point , Americans needed to address the issue of deficit.
Many artists, both Republican and Democratic, share this view. And the solution is not just about raising taxes, but also about having sound policies that encourage business growth. I just returned from Europe last week, and everyone there was talking about boosting economic growth, attracting more investment, and reducing regulatory barriers because excessive regulations are slowing growth.
Of course, ensuring food safety , clean water, and the banking system is still crucial, but the government needs to do a much better job . Policies that support growth and are business-friendly are always very positive, and hopefully, they can partially offset any future overspending . As we've discussed, the current environment is one of high yields, and he previously stated that some kind of disruption might occur in the global market.
Is that possibility still possible ? And if it existed, what would it look like ? Yes, I wouldn't call this a high-interest rate environment. If you look back at economic history, you'll see that interest rates used to be much higher, and that came as a surprise to many. I think many of the current long-term trends have inflationary elements, and another point that people need to pay attention to is that credit spreads are currently at low levels.
Therefore, you may face two risks simultaneously: widening credit spreads and rising interest rates. We'll just have to wait and see how things unfold. I don't want to make any predictions. In terms of cost, I'm quite skeptical that we'll have a prolonged soft landing. Let's move on to China, where JP Morgan is operating.
Is this still a priority market ? Because while his rivals are mitigating risk and withdrawing, JP Morgan is increasing its resources here. How would he assess China over the next 12 to 24 months? We invest with a long- term vision. We're not the type to buy and sell stocks. When it comes to investing, look at this conference.
Our first conference, 21 years ago, had only a few hundred attendees. Now there are nearly 3000 people, around 1300 companies and investors from 33 countries. We are currently researching approximately 400 Chinese companies. We are long-term investors here. It's true that there are many controversial issues, but we have to live in the real world , not in the ideal world we aspire to.
And we will continue to grow. We are currently supporting approximately 1700 multinational companies operating in China. These customers come from America, Latin America, the United States, and Europe. At the same time, we also help bring many Chinese companies to the global market. We have staff who speak Cantonese in Brazil, so we use both Portuguese and Chinese to promote trade between the two countries.
We are long-term investors, and despite our concerns about the current environment, I believe the situation will improve. We will not retreat. I know there are rumors that we are scaling back our operations in China. That is completely untrue. We understand that political pressure will remain until everything is resolved.
So he's viewing China as one of his priority markets for investment over the next 12 months. Was that a consensus within the leadership team? He emphasized the importance of a long- term vision. Yes. The consensus is that the companies will continue to do business here. There might be some adjustments due to trade negotiations, but I don't think the US government wants to leave China.
We just had the US Treasury Secretary meet with leaders here, and they discussed building a good relationship. I'm very happy to see them begin to have a dialogue about improving their relationship. Hopefully there will be a second round, a third round, and a fourth round. I am optimistic that we will eventually achieve a good position.
Regarding China, let's look back at their development process. Over the past 20 years , they have done a great job of improving people's lives. That doesn't mean I agree with everything they do. I am a patriotic American , a true capitalist. But I understand that they are striving to develop their country.
I see their cars, their environment, they've done quite well, and Americans should realize that we have to compete with them. I will leave foreign policy to those responsible within the government. But companies like CL's listing in Hong Kong are often caught in the middle of US-China trade tensions.
I think JP Morgan was also involved in the CATL listing case in Hong Kong, but they still stood their ground. Why so ? First of all, foreign policy is determined by the government, not JP Morgan, and the government has not banned CATL. Some people object for a variety of reasons . Some of the reasons might be valid.
But in my opinion, the government should be the one to decide. If they tell us not to do it, I'll stop immediately; there's no other option . I understand that there are real issues related to national security. If you consider all those issues carefully, I understand. But we don't think that applies to this particular case.
We and other investment banks have conducted extensive due diligence regarding the concerns raised by the public. I know I'll be criticized for that too, but if we think it's wrong, we wo n't do it. Do you anticipate even more pressure? We receive pressure from the government almost daily regarding everything we do.
They said we weren't good enough, that we only supported oil and gas companies. We understand that. We also faced pressure from mayors and governors. I understand that. We strive to respond to all inquiries rationally and to serve our customers. If there are legitimate complaints, we try to make adjustments.
This is a volatile relationship, and that volatility is expected to continue. Do you see JP Morgan and companies like UPS continuing to face government pressure, possibly to withdraw from business deals ? The Chinese government will likely be very cautious. Both governments currently have measures in place to control exports, imports, and investments.
I believe those things will be implemented in a more systematic way over time, and we will adapt to that. So what is his strategy in Asia? Against the backdrop of increasing pressure on China and growing talk about diversification. How does he view his business operations in Asia? Yes, we consider each country based on its population, educational attainment, culture, growth rate, and natural resources, or the lack of those factors.
We invest in most countries, and we establish networks with them. We are providing banking services to companies all over the world. For example, if a company is from Singapore, we serve Singaporean businesses, and if they go global, we go with them. Almost all countries are developing in that way. That's how we approach evaluating each country, and we don't invest in a buy-and-sell manner like buying and selling stocks.
We don't view investing in a company or a country the same way we view investing in stocks. It's like, "Oh, Vietnam doesn't seem promising, let's withdraw," or "Oh, this seems like a potential investment." We observe how they grow their population, develop their businesses, and their economy. And of course, sometimes we simply follow our clients into those countries.
Many of the American companies we work with want us to have a presence in more countries so they can integrate payment systems, and we build those systems. Sometimes that's precisely why we enter new markets. I guess the question is about Trump's tariffs and the trade war. Did that influence his investment decisions and development direction ?
It's not real and doesn't have a direct impact. As I said, I am a patriotic American and I think that having national security concerns is perfectly legitimate. I think America needs to do a better job of focusing on national security issues. We shouldn't rely entirely on one country for rare earth supplies, especially if that country could become a competitor.
That 's a mistake we've made and it needs to be corrected. There are many legitimate issues that need to be addressed, and the government is doing just that. We have spoken with them. We have just announced the establishment of a geopolitical center. We assist other companies in assessing supply chains, cybersecurity resilience, and many other factors.
I think we 'll be alright in the end. Even President Trump once said he liked President Xi. He wants open trade; he just wants to fix the unfairness in trade. If it's unfair, it needs to be fixed. He just mentioned the geopolitical center; please elaborate on that. What was the idea behind it? How will it help with navigation?
How will this help your customers navigate ? First and foremost, we established this center to serve ourselves. As you can see, JP Morgan has always meticulously analyzed each country and its potential risks. We assess hundreds of different risks to ensure we have the capacity to respond. This geopolitical center serves both our own needs and aims to educate our clients.
Because so many customers frequently ask us what they should do with this country? What should we do? How do we assess risk? We simply help them recognize the risks they are facing. So this is an additional form of support . I want to remind everyone that we truly help our clients not only with cybersecurity risks, geopolitical risks , and corporate governance, but also with fundraising.
Buying, selling, importing, and many other things. This is just an additional service we offer, and of course, that center is located in the Middle East. Is the region's role in the world rapidly increasing ? Which area? Middle East. We've been present at the car factory for over 80 years . Yes, this region has assets, it has sophistication, and I think they have leaders who want to do well, want to grow and diversify their economy.
Is this the time for the Middle East ? I hope so. Look, the Middle East is a very complex region, and terrorism is terrible. But I think there's been a complete shift in how they see things. I think they genuinely want peace. I think all the major players in the Middle East, I'm talking about Saudi Arabia, the UAE, Qatar, Egypt, they all genuinely want peace.
It would be beneficial for them if they could bring about a lasting peace that includes Israel and, hopefully, ultimately, the Palestinians. Of course, we're talking about the Middle East in the context of President Trump's successful visit to the region. Do you think that trip marked a turning point in your relationship?
Considering the level of discernment required to assess that, I cannot offer a judgment right now. But if you look back at Trump's first term, I think there was a clear shift in how America viewed Saudi Arabia. I think Rap Zeú has changed a lot. They were really different from when I first came there.
Women can now drive, go to school, and no longer have to wear bikinis . Jamie, I would be remiss not to ask you about the federal reserves. In a context where interest rates remain higher than before and may rise further. Will it continue to rise, and what is holding Fé back? Yes, people always think that Fé is all-powerful and can do whatever they want.
They certainly have the authority to determine short-term interest rates, but they also have to closely monitor the reality. They raised interest rates because inflation was rising, and even now they still can't control everything. Trillions of dollars worth of bonds are traded daily by global investors .
They can't control all of that . Foreigners hold up to $35 trillion in tradable U.S. assets. Therefore, Fé had to react to reality, and I don't mean to criticize. They say they depend on data, and that's true. They have to wait and see what happens before taking appropriate action. But it seems their reality was different from the reality he had in mind.
Based on what New Kashkari has said, he believes the US economy is holding up. Some Fé officials even say that the current policy is at a sweet spot, but their reality is quite different, isn't it ? I disagree that we are at the sweet spot. We have to separate two things: the economy has performed quite well.
All the data points to that. We almost had a soft landing. But that doesn't say anything about the future. To worry about the future, we must look at the factors that influence it and then reflect back on the present. I talked about the huge budget deficit. We have n't finalized our quantitative tightening policy yet .
There are many geopolitical issues that also have factors contributing to inflation. They have to react to all of that . I think they're doing the right thing by waiting and seeing before making a decision. One last question. I promise this is the last question about the US dollar. Normally, when interest rates are high, the dollar strengthens, but currently the opposite is true.
How does he view the weakening of the dollar? Yes, I think that's understandable. Foreigners own up to $35 trillion worth of US securities. The United States remains the most prosperous and innovative nation on the planet. That will not change. But I think rational people might be reconsidering. In addition, asset prices are currently high, so people all over the world are feeling optimistic.
Stock prices in the US are high, while the MIC (Viability Index) in other parts of the world is much lower. Therefore, some people might say they should definitely reduce their dollar assets and move them elsewhere. We may see some adjustments, but the most important thing for America is to do the right thing and develop its own economy.
That includes housing, businesses, innovation, growth, and R&D investment. That's the core issue.
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