JPMorgan bond chief Bob Michele sees worrying echoes of 2008 in market calm

cnbc.com:

In this article

To at least one market veteran, the stock market's resurgence after a string of bank failures and rapid interest rate hikes means only one thing: Watch out.

The current period reminds Bob Michele, chief investment officer for JPMorgan Chase's massive asset management arm, of a deceptive lull during the 2008 financial crisis, he said in an interview at the bank's New York headquarters.

«This does remind me an awful lot of that March-to-June period in 2008,» said Michele, rattling off the parallels.

Then, as now, investors were concerned about the stability of U.S. banks. In both cases, Michele's employer calmed frayed nerves by swooping in to acquire a troubled competitor. Last month, JPMorgan bought failed regional player First Republic; in March 2008, JPMorgan took over the investment bank Bear Stearns.

«The markets viewed it as, there was a crisis, there was a policy response and the crisis is solved,» he said. «Then you had a steady three-month rally in equity markets.»

The end to a nearly 15-year period of cheap money and low interest rates around the world has vexed investors and market observers alike. Top Wall Street executives, including Michele's boss Jamie Dimon, have raised alarms about the economy for more than a year. Higher rates, the reversal of the Federal Reserve's bond-buying programs and overseas strife made for a potentially dangerous combination, Dimon and others have said.

But the American economy has remained surprisingly resilient, as May payroll figures surged more than expected and rising stocks caused some to call the start of a fresh bull market. The crosscurrents have divided the investing world into roughly two camps: Those who see a soft landing for the world's biggest