Inflation, recession on top of minds at Milken conference

Inflation was a big topic of conversation at the Milken Institute Global Conference on Monday, with some speakers saying it could possibly push some of the world's economies into a recession in 2023.

Jane Fraser, CEO of Citigroup, said during a panel discussion in Beverly Hills, Calif., that she worries more about stagflation in Europe than recession in the U.S.

However, Scott Minerd, chairman of investments and global CIO at Guggenheim Partners, said on the same panel that it will be difficult for the Federal Reserve to maneuver the U.S. economy into a soft landing. He added he doesn't expect to see a recession hit the U.S. this year but possibly at the end of 2023.

Countries and their economies are moving out of the pandemic at different trajectories, said David Hunt, president and CEO of PGIM, also on the same panel.

In Europe, "personally I think we are one hydrocarbon sanction away from a recession starting," he said.

One of the reasons for inflation are higher wages, said Rishi Kapoor, co-CEO of Investcorp who spoke on the same panel. One of the "silver linings" of the conflict in Ukraine, Mr. Kapoor said is that it has resulted in a significant number of refugees fleeing to Europe and the United States.

These refugees are highly skilled people who can have a deflationary impact on the U.S. economy by relieving the tight labor in the U.S., Mr. Kapoor said.

Speaking in a one-on-one setting at the Milken Conference, Ken Griffin, founder and CEO of Citadel, pointed to wage inflation as an "elephant in the room"

"That is a big problem for the U.S. economy," Mr. Griffin said. He added that he is most worried about the workers in their 50s who retired early,

Mr. Griffin added that Federal Reserve Chairman Jerome Powell has a "pretty tough job to fill" because if inflation is transitory then he has more room to maneuver rates into 2023. But if inflation doesn't ease soon, he is going to have to put on the brakes pretty hard and that will put the U.S. into a recession, Mr. Griffin said.

He also said that corporate America is being deluged with regulation and spending more time playing defense to the new regulations than building their businesses. When President Joe Biden took office, his administration moved the U.S. out of the oil and gas fracking business. Now the U.S. is turning to Venezuela for oil and U.S. consumers are paying the most for gas than in their lifetimes, Mr. Griffin said.

Mr. Griffin also acknowledged that his views have evolved on cryptocurrency, noting that the younger executives at Citadel "think I am a dinosaur on this issue."

He said that he thinks it is reasonable to build portfolios for retail and institutional investors that include cryptocurrencies. The trick will to be build and run portfolios to very high standards.

Mr. Griffin also said he is watching Florida Gov. Ron DeSantis as a possible candidate he would back for president.

"He's done a lot of things right," Mr. Griffin said. He approved of the new Florida law signed by Mr. DeSantis in March that bars public school teachers from instructing in kindergarten through third grade students on sexual orientation or gender identity.

"I'm in favor of prohibiting teachers from talking to first graders about their sexuality," he said.

However, he didn't favor Mr. DeSantis going after The Walt Disney Co.'s tax status because it looks like retaliation against Disney CEO Bob Chapek speaking out against the law.