Terry Duffy is the Executive Chairman and President of CME Group, which is hosting its annual Global Financial Leadership Conference next week in Naples, Fla. Mr. Duffy chatted with SmartBrief and shared more background on the GFLC.
The Global Financial Leadership Conference in now in its 9th year. How has the event evolved?
The GFLC has evolved into one of the foremost events for leaders in financial services. Our clients get to spend time with some of the greatest minds in global economics and politics to discuss significant issues impacting our world. This is our ninth year, and we continue to feature remarkable speakers, including former U.S. presidents, foreign heads of state, global business luminaries, and much, much more.
I think the best way to describe our speaker line-up is something a client told me last year, which is that the GFLC is the only conference where every panelist would be a keynote speaker at any other event. That statement really says it all when it comes to the uniqueness and diversity of our event. This year, following the election, ongoing Brexit fallout and more, we couldn’t be more timely.
This year’s GFLC agenda is packed with heavy hitters from the world of politics. What are some of your observations from a year that included the Brexit vote and the US elections?
What it boils down to is that markets are unpredictable. In 2016 we saw a lot of political and economic uncertainty in the marketplace including Brexit, negative rates, a potential Fed move, depressed oil prices, the list goes on. One of the biggest challenges for investors was low interest rates, which became a global phenomenon in 2016.
Regarding the recent election, traditionally U.S. elections have had only a modest short-term impact upon financial markets. This election might be an exception. It’ll certainly be interesting to see the longer term market reaction to the results.
The financial industry is still trying to sort out what the Brexit vote means for markets from a regulatory perspective. What are the key issues that concern you the most?
I wasn’t surprised by the market reaction to the vote. But this isn’t a one and done scenario. The global markets will need to digest it for the long-haul. There are a number of treaties that need to be renegotiated, and the marketplace will look at how those play out, and the potential for volatility around those discussions. Market uncertainty creates volatility, and Brexit could be a source of it, especially for currency markets, during the next few years.
Former Speaker of the House John Boehner will be at GFLC talking about how to rebuild trust between the American people and Washington. From your perspective, what are the most important steps that need to be taken to repair that relationship?
Both in Washington and in the financial industry, many leaders seem to have forgotten who they serve, and the public knows it. Just as the public’s view of the financial industry was tarnished following the 2008 financial crisis, Washington’s credibility has perhaps never been lower following years of gridlock in Congress. To rebuild the public’s trust, the financial industry needs to demonstrate that our mission is to help the American economy prosper. And when they fail, they need to held accountable. Similarly, Washington needs to show that our government is working for its citizens. It’s important that our political leaders prove to the American people that they can get things done, make tough decisions that need to be made, and go back to their constituents with real results.
Raghuram Rajan returns to GFLC after a stint as the Governor of the Reserve Bank of India. What are your thoughts on global monetary policy? Are policymakers out of ammunition?
Low interest rates are becoming a global phenomenon. They are closely related to the massive accumulation of public and private sectors debt in the world’s largest economies. These include Japan, the U.S., Europe and more recently China, Australia, Canada and South Korea.
As the U.S. and other countries balance the adverse impact from low or negative rates, our hope is that they choose more effective policies. While policymakers have backed themselves into a corner in many cases, they’re not out of options to make positive changes.
The Federal Reserve has been sending mixed signals that are causing a lot of uncertainty in the marketplace, and regardless of when they raise rates, we’re going to continue to see volatility as a result.
Simply put, rates need to move. You don’t want to move when you have to, you want to move when you still have the ability to move. And a normalized-rate environment would be better for the global economy. The Fed appears to be headed towards a rate increase in December. The question heading into 2017 is how much follow-through there will be?
“Fintech” wasn’t even in the lexicon when the first GFLC took place and now it is everywhere. How is the rapid evolution of financial technology re-shaping today’s markets?
Fintech, or even technology more broadly, is already having a far-ranging impact on today’s markets in the realms of digitization, artificial intelligence and cybersecurity. Sometimes the best innovations are those that meet a basic need. Facebook improved communication. Uber helps you move. Airbnb gives you shelter. And when you think of the importance of our markets, technologies that are helping liquidity, price discovery and the basic need to make and protect money are those that are made to last. The financial markets are now at the forefront of technological change and it will be interesting to see how tech innovation continues to rapidly reshape our markets.