Writer: Max Crampton-Thomas
2 min read June 2021 — Pilar Oppedisano, executive director and Minnesota market manager at J.P. Morgan Private Bank, believes the Twin Cities is a strong market where the bank, its clients and the local community will thrive as the economy continues to recover. As head of the firm’s Minnesota private wealth arm, Pilar is focused on the firm’s ambitious vision to grow the Private Bank’s business. Overseeing a team of investors, bankers and advisors that provide high-net-worth individuals, foundations and endowments across Minnesota with financial advice, she and her team are helping them build, preserve and manage their wealth for themselves and future generations. Optimistic about the country’s economic recovery, she plans on doubling the office’s size over the next five years.
How has the pandemic affected your operations in the Twin Cities?
Despite the pandemic we’ve adapted and had a strong year at J.P. Morgan, not only on a global scale but also on a local Minnesota scale. We’ve hired seven new team members since the pandemic began. We started 2020 in the office and when the pandemic arrived, we made the transition to working from home, going completely digital in just two weeks. During a time when both our employees and our clients were seeking connection and collaboration, utilizing technology was key for us. Our clients loved that they could jump on a Zoom call and have face-to-face discussions with us. We brought in a lot of new clients who we sometimes never met in person because of the pandemic, but we were able to leverage technology so that they felt they were sitting right next to us.
Our focus at the Private Bank is rooted in our ability to help people, make real connections and support our clients – we doubled down on that focus when the pandemic began. Our team mobilized around having a meaningful impact on our client’s lives during an unprecedented year, we did this through advice and guidance. When the stressors around family, security, finances and goals came to the forefront, we made sure we were proactive in helping them navigate through them.
For example, the pandemic has really sharpened our clients’ focus on their estate planning. All of a sudden, mortality became front and center in a way it wasn’t before. People began thinking, do I have medical directives set up? What does my trust look like? What does my will look like? That’s all tied to their financial picture.
What is the appeal of the Minneapolis market for the bank?
Minneapolis is the 13th-largest American city and is home to 24 Fortune 1000 companies. Over the last decade, there has been incredible innovation and wealth creation here. There is a place for JPMorgan Chase in almost every large metropolitan area because when there is a downturn, or when investors or clients see volatility, you’ll usually see a flight to quality.
We have a local team of bankers living and working where their clients are, and bring that understanding to the guidance and advice they deliver to their clients. We also have the vast resources only the largest of global banks can offer. We’ve seen an uptick in M&A locally, many of our clients are going through a transitional period with their businesses and personal balance sheets. There’s a huge opportunity for J.P. Morgan to support those changes, serve our clients and grow.
What might indicators such as low interest rates mean for the regional economy?
Rates, in general, have been a huge topic for our clients, and I think the most obvious one is the fact of mortgages and the housing market. There has been a huge decline in mortgage rates, and with rates so low, it may make sense to refinance a mortgage (floating or fixed), even if it was taken out in the last few years.
Minneapolis is an entrepreneurial metro, and if you’re a business owner during a low rate environment it could be a good time to expand facilities or invest in new capital equipment. A portfolio line of credit could offer low rate financing that typically has no setup costs. To boot, a provision in the 2017 Tax Cuts and Jobs Act allows business owners to expense 100% of the cost of many of these assets. However, the provision begins to phase out in 2023.
We’re also starting to see a bigger play into the alternative investment space. Adding alternatives can help strengthen your portfolio by providing new sources of diversification and return. If you have a multi-year time horizon, now may be a good time to explore alternative investments in real assets—such as real estate and infrastructure, as well as private and direct lending strategies. Real assets can provide low or negative correlation to stocks, higher yields than government bonds, protection against inflation and a steady stream of income. Environmental, Social and Governance (ESG) investing might also come in to play with this approach – areas like clean energy, social impact and overall sustainability are gaining momentum, and sustainable investing does not require a performance tradeoff.
Overall, I’m optimistic about the regional recovery. There is a ton of pent up demand and with the continued rollout of vaccines across the country, we’ll see the positive impact unfold. The world already feels different now than it did last summer. We believe the stage is set to make 2021-2022 a period of economic growth not seen since the early 1980s. Jamie Dimon, our Chairman and CEO, explored this point in his JPMorgan Chase Annual Letter to Shareholders.
What might inflation on the horizon mean for the economy?
When the coronavirus pandemic jolted the global economy last year, policymakers responded with unprecedented fiscal and monetary support. Some observers now worry that these historic actions will spark an outbreak of inflation, sending interest rates much higher and potentially derailing the recovery. Should you share this fear? Our short answer—no. We think inflation will struggle to rise materially higher than 2%. Indeed, we don’t see U.S. inflation rising above 2% on a sustained basis before the second half of 2023.
To determine our outlook for inflation over the short term, we look at the gap between services and goods inflation. In 2020, services inflation collapsed (e.g. the cost of an airline ticket or a haircut), while the cost of goods spiked. As the pandemic subsides, we expect the relatively wide gap between services and goods inflation will narrow. Goods inflation should cool as global manufacturing production ramps up, given low inventories in the sector, and services inflation should firm as the resumption of services activity allows companies to regain pricing power. In assessing the long-term outlook for inflation, it helps to break inflation down into two broad categories, cyclical and secular.
Cyclical inflation moves with the business cycle (think of a trip to Disney World). Secular inflation generally does not (think of the price of a big-screen TV, for example). Secular inflation has been on a downward trend for decades, largely due to advances in technology and globalization. We doubt this backdrop will change anytime soon.
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