Wall Street's Playbook for a Looming Correction

Risks seem to be mounting everywhere. Between a meeting of CEOs with President Biden in bid to stave off a U.S. debt crisis and the markets simply getting choppier, investors are getting their playbooks in order.

“You could see corrections. Certainly China has already gone through a bit of a correction. We may be seeing a little bit of that right now,” Carlyle CEO Kewsong Lee told me at the Bloomberg Invest conference.

He’s among the CEOs and prominent investors who sounded alarms about valuations, interest rates and decelerating economic growth when they spoke to us this week.

For Blackstone’s Jon Gray, it’s not necessarily the top of the market. Yet Gray told my colleague Alix Steel that it’s a good time to sell assets. Same goes for Brookfield’s Bruce Flatt.

“It’s not like we think that it’s the only thing to be doing, because we’re buying a lot of things too,” Flatt said.

And some are more worried about inflation than others. Steven Mnuchin, the former U.S. Treasury secretary now running his own firm, voiced the reality of 3.5% 10-year Treasury yields -- which, in addition to piercing market valuations, would also increase the cost of U.S. debt and create issues with the country’s budget. He told Bloomberg’s David Westin that it’s time for the Federal Reserve to normalize policy.

But, for now, “while it could be painful, a healthy correction is not necessarily a bad thing,” Carlyle’s Lee said. “Whenever things like this happen, it creates opportunity.”

Poker and Pay

Here’s a reality about money management: The percentage of portfolio managers who are women hasn’t changed in more than 20 years.

And, in the U.S., the portion of fund managers who are women has actually declined over that time, according to Morningstar data. So one billionaire investor turned to an unlikely place to chip away at the problem.

Peak6 Investments co-founder Jenny Just, a longtime trader herself, built an online poker game that connected women throughout the pandemic. It promised to teach skills like negotiation and risk-taking. More than 4,000 women have signed up in more than 20 countries, with universities including Northwestern’s Kellogg School of Business and businesses such as Morningstar starting to offer it to their own networks of women.

“Instead of a seminar, a rah-rah get together, I’m actually doing something tangible,” Just told me. “It’s a really safe place to fail, and practice failing, and then getting back up and trying again.”

Among the benefits: Women using the program say they’ve translated the skills into negotiating better pay at work. And, if nothing else, it’s been better than Zoom drinks.

More on Wall Street

• Jamie Dimon outlines the risks tied to the debt ceiling, and says it should be eliminated entirely: “We should never even get this close.” And even with a temporary lift, Charles Myers of Signum Global says you shouldn’t rule out a U.S. downgrade.
• SPAC queen Betsy Cohen believes about 30% of more than 400 SPACs looking for targets are bound to fail. Here’s her full interview with Bloomberg’s Crystal Tse, and the Bloomberg Deals newsletter.
• Don’t miss Ken Griffin’s 70-minute sit-down with Bloomberg’s Erik Schatzker. It’s one of the biggest windows yet into the Citadel founder’s provocative -- and often polarizing -- views.
• Rich Handler is a newly minted billionaire. He spoke to Bloomberg’s Sridhar Natarajan about the rise of Jefferies this year, with his firm’s shares outperforming those of large Wall Street rivals.

More to come. JPMorgan’s stock has kept hitting records this week and it will lead off big banks’ earnings in just a few days. Join us from Wednesday onward from 7 am. Until then, I’ll be looking forward to hearing your thoughts on what we should cover next at [email protected].