Morgan Stanley CEO: Markets are overreacting, Fed could hike more


The extent of the oil price plunge has been an “absolute shocker,” but the world’s economic picture otherwise still looks pretty good, Morgan Stanley Chairman and CEO James Gorman said Thursday.

The U.S. economy is not under stress, he told CNBC’s “Squawk Box” in an interview from the World Economic Forum in Davos, Switzerland. While not a perfect picture, it’s not the kind of economy that should be causing such turmoil in the markets, he said.

“My screen I have at my desk, there’s about 70 stocks that I follow, from energy, financials, consumer, housing, [and] media; every one of them is down, precipitously in three weeks,” Gorman said, adding that he does not see a reason for such carnage.

Gorman said he’d be surprised if there weren’t more Federal Reserve interest rate increases this year.

The Fed raised rates in December for the first time in more than nine years. Investors had been expecting four more hikes in 2016 based on policymaker projections at the time. But the horrid start to the new year in financial markets has scaled back those forecasts.

Oil has been the “wildcard,” Gorman said, admitting that nobody in the past two years saw crude collapsing as much as it has. But he argued that somebody could make lots of money going long “if they have the stomach over a two-year period.”

“Supply and demand eventually rebalance. We’ve seen this again and again and again,” he said. “The question is if you got the stomach to live through this rebalance.”

Addressing concerns about China, Gorman said the Chinese are facing huge transitional changes from an investment- and management-led economy to a more consumer- and services-driven model.

But he argued, “China is not having a hard-landing here. China is having a natural, mathematical slowdown given the size of the economy.”