Wall Street execs sound warnings on economic outlook

State of play: Businesses are consumed with how to react to tariff impacts, distracting them from larger strategic priorities, JPMorgan CFO Jeremy Barnum said on the company's call Friday.

• Small businesses seem especially challenged, he said. And the scale of the tariff impact is varying widely by sector.

What they're saying: "It's hard [for businesses] to make long term decisions right now. And so we'll see how that plays out," Barnum said.

• "Is it bumpier for some clients? Of course, it is," Morgan Stanley CEO Ted Pick said on the firm's own call Friday morning. "We have to see how they respond to that over the course of the weeks and months to come."
• "I think they're trying to figure it out," Wells Fargo's Charles Scharf said of the firm's corporate clients. "Everyone is trying to assess the situation in terms of 'will there be a resolution to some of these things, what does it mean for their business,' and that's not completely clear."
• BlackRock CEO Larry Fink said, "uncertainty and anxiety about the future of the markets and the economy are dominating each and every client conversation."

The big picture: "A lot of people are not doing things because of this," JPMorgan CEO Jamie Dimon noted, citing anecdotal conversations with clients.

• "They're going to wait and see. And that's [mergers and acquisitions], M&A with middle market companies. That's people's hiring plans."

The uncertainties banks are hearing from their corporate clients are likely to translate into a frenetic earnings season, Dimon said.

• "You're going to hear 1,000 companies report, and they're going to tell you what their guidance is. My guess is a lot will remove it," he said. "They're going to tell you what they think it might do to their customers, their base, their earnings, their cost, their tariffs."

Reality check: Executives had a hard time predicting what would need to happen at this point to remove those uncertainties, at least to the point where normal business activity would resume.

• "The question is, what are we talking about with respect to the macro environment," Morgan Stanley's Pick asked, responding to an analyst's question on the call. "Are we talking about the rearchitecting of industrial policy in the context of America's place today and where it wants to be decades from now?"

On the consumer side, people still seem to spending, but there are some red flags. JPMorgan's Barnum noted what appears to be a certain amount of "front-loading," or people moving up purchases on items where you would expect price increases from tariffs.

• The firm also noted declining cash buffers in account balances, and changing spending patterns. It also put aside $973 million — more than analysts anticipated — to cover potential loan losses.
• But as of now, JPMorgan said it has not seen signs of distress, even in the lower income segment. Wells Fargo said consumers have "remained resilient," with debit and credit card spending patterns remaining stable in the first quarter.

On the recession question, comments were mixed Friday from executives. JPMorgan's economists were putting it "about 50-50," as of Friday morning, Dimon noted.

• BlackRock's Fink said on CNBC, "I think we're very close, if not in, a recession now."
• Pick sounded a more optimistic note, saying Morgan Stanley's "cautiously optimistic that we won't" slide into one. "The consensus today is softer, not negative growth."

The bottom line: This earnings season may raise more questions than it answers.