Today’s business operating landscape is a decidedly modern one.
And an increasingly digital one — the hyperconnectivity of which impacts nearly every near and long-term forecast.
That’s why PYMNTS CEO Karen Webster sat down with Amias Gerety, Partner at QED Investors, to get his view on everything from the Ripple vs. Securities Exchange Commission (SEC) decision to recession speculation, the overall changing landscape of the economy and of course, the emergent utility of artificial intelligence (AI).
The far-ranging discussion touched first on a topic discussed last time, the SEC’s actions against the cryptocurrency industry more broadly, and the case with Ripple specifically.
“The retail investor clearly lost, retail investors get less protection because they are less sophisticated,” Gerety said, at least in the short term.
“I don’t think that’s the principle that’s going to stand in U.S. law for very long,” he added.
That’s because Gerety believes the SEC will appeal — and that the current judge’s ruling, as delivered, failed to address explicitly many of the downstream implications that could “cause a lot more fireworks.”
The implications of the Ripple decision are far-reaching, touching upon the definitions of securities and exchanges outlined in the 33 Act and the 34 Act, which define securities and regulate exchanges, respectively.
“The particular logic of this case is unlikely to become enshrined 30, 40, 50 years from now. It’s just the inverse of the logic that we live by, which is that public registration and public disclosure are designed to protect retail investors,” he explained.
But crypto represents just a small slice of the broader economy. What about the rest of the macro environment?
The specter of a possible recession in 2024 has added another layer of complexity to the current landscape — which, depending on the day and the expert, will either take the form of a hard landing or a soft one.
“From the perspective of history, rate hiking cycles tend to end in recession, not in a soft landing,” Gerety noted. “While I’m certainly rooting for a soft landing, it would be great for the U.S. society, U.S. consumers and our companies, I think the probability is low.”
He explained the concept of “lapping the downturn,” where tech firms and high-growth businesses receiving 2021’s “big shock” have since refactored their plans and cut spending.
“We’re now about 12 months after that. So now if a business feels they have an underlying strength, and when the tide went out they were wearing their swim trunks, well — the tide is back in now. These firms are confident their trunks are well tied and they’re going to start swimming as fast as they can because they’ve lapped that downturn,” Gerety said. “That’s what we’re seeing at the micro level.”
Different segments have taken their medicine at different times, he added.
The discussion also touches upon the 2% inflation target adopted by central banks. Gerety pointed out that this target was initially chosen by the Central Bank of New Zealand and may not accurately reflect the current economic climate. He added that while there may be internal conversations about moving away from the 2% target, central banks are hesitant to do so as it may threaten their credibility.
“I think if we can survive this with either a mild recession or in the best case, the soft landing, Global Central Banks will have earned the right to think about new approaches other than just that fixed 2% target,” Gerety said.
Businesses across various sectors are feeling the impact of reduced consumer spending. However, despite this economic downturn, chief financial officers (CFOs) remain optimistic about growth and are actively deploying capital to expand their businesses.
“If you’re profitable, you control your own destiny. And if you survive, you tend to win,” Gerety said. “There’s a shakeout going on, and hopefully we’ll come through this with real businesses. Firms that are doing well now are growing more confident in their enterprise value.”
People need a reason for excitement, he added, explaining that with the rise of artificial intelligence (AI) as the cumulative effect of the connected age, there will be a positive narrative around productivity increases.
“We certainly are excited about the efficiency gains that we see in our companies. Fewer engineers doing more work, getting through things faster, making their customers happier,” Gerety said.
“The hopeful case is that there’s a redemocratization of productivity improvement away where smart people ideas can still get the benefits of technology and automation. It’s a super hopeful and I think super exciting thesis,” he added.
As Gerety explained, the microphone into the macro starts with an activity that shouldn’t be there, whether it’s AI and the tech world, or even something like the Barbie phenomenon or Taylor Swift’s tour. As long as people are excited enough that their behavior changes, the macro-operating landscape will also change.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More