Time to talk about inflation—or not.
With 87% of Americans still roiling about rising prices for goods and services, finance company executives aren’t biting their nails. Or maybe they are just tired of talking about it—that is, if their commentary on this quarter’s earnings calls is any indication.
On the heels of the first three months of this year, where more corporate executives were discussing inflation than they have since 2011, finance executives haven’t had a whole lot to add to the conversation in recent weeks. While some banks and brokerages still have yet to report their earnings figures, early statements from some of Wall Street’s largest banks and brokerages indicate that financial executives aren’t anxious about the rising prices and supply chain congestion.
Inflation rates have been on the rise—harboring concerns for companies like Ben & Jerry’s owner Unilever, which is pulling back on profitability goals it had set for the year. Companies that sell consumer goods are having to decide whether to pass cost increases down to the consumer or absorb them as supply chain issues, pent-up demand and commodity prices skyrocket.
“Investors are wrestling with the conundrum of the highest U.S. inflation in 30 years,” Ralph Hamers, CEO of UBS Group said on the Swiss Bank’s earnings call July 20. (It was one of only two times he mentioned inflation).
While inflationary fears are a key concern for consumers and certainly for used car companies, there are potential ramifications on the financial sector, too. Higher inflation could put a damper on record stock market returns, trigger higher mortgage rates, and even knock some of the record dealmaking the industry has experienced. These are all within the realm of possibility, though the Fed has been saying it expects the impact of inflation to be temporary. As for what financial executives think about all of it, it’s hard to know: They haven’t been saying a whole lot.
In the last two weeks, inflation was hardly mentioned—or not discussed at all—on earnings calls for Bank of America, Morgan Stanley, Wells Fargo, and Citigroup. There was little sense of alarm at other financial institutions either. Here’s what they had to say on the rare times it was mentioned:
Commentary from the Federal Reserve shows that “the central bank is focused on this risk,” Goldman Sachs CEO David Solomon said on July 13. That supports the investment bank economists’ own views inflation pressures will be temporary and any resulting risks “could be adequately managed.”
Inflation came up briefly during the earnings call for JPMorgan Chase, which has been hoarding cash in case the effects of price spikes are longer-lasting. But while the bank’s CEO, Jamie Dimon, said he expects inflation to be “a little bit worse than what the Fed thinks,” it hasn’t played any kind of significant role in the bank’s expenses.
“In terms of inflation, I would say that we’re not seeing inflation in our actuals,” Jeremy Barnum, CFO of JPMorgan Chase said on the company’s earnings call last week. “But obviously, your guess is as good as mine in terms of the future,” he said, noting that “it would be reasonable to assume that’s going to be a little bit of a challenge,” although it wasn’t clear to what degree.
It’s possible inflation could have an impact on labor costs and the competition for talent at Citigroup, according to the company’s CFO, Mark Mason, although “we deal with that on a regular basis,” he said July 14, “and we continue to look for productivity and efficiency savings that largely tend to offset that.”
However the big banks are looking at it, inflation matters quite a lot to consumers. A recent Fortunesurvey from earlier this month shows that fear has continued to rise in recent months, with more than half of Americans saying they are “very concerned” about it. (Some commentators argue inflation will actually benefit millions of Americans, particularly those in debt).
“Inflation concerns [are] top of mind for investors,” BlackRock CEO Larry Fink acknowledged on the asset manager’s call July 14, mentioning it had seen inflows into exchange-traded funds linked to inflation rates and that the company needed to “assess the potential impact on their portfolios.”
As for now, all Americans can do is sit back with pints of Ben & Jerry’s (that may soon go up in price), ponder whether the Fed will take action and see how all of it plays out.
