to at least one market veteran the stock markets resurgence after a string of bank failures and rapid interest rate hikes means only one thing watch out the current period reminds bob michele chief investment officer for jpmorgan chase s massive asset management arm of a deceptive lull during the 2008 financial crisis he said in an interview at the banks new york headquarters this does remind me an awful lot of that marchtojune period in 2008 said michele rattling off the parallels then as now investors were concerned about the stability of us banks in both cases micheles employer calmed frayed nerves by swooping in to acquire a troubled competitor last month jpmorgan bought failed regional player first republic in march 2008 jpmorgan took over the investment bank bear stearns the markets viewed it as there was a crisis there was a policy response and the crisis is solved he said then you had a steady threemonth rally in equity markets the end to a nearly 15year period of cheap money and low interest rates around the world has vexed investors and market observers alike top wall street executives including micheles boss jamie dimon have raised alarms about the economy for more than a year higher rates the reversal of the federal reserves bondbuying programs and overseas strife made for a potentially dangerous combination dimon and others have said but the american economy has remained surprisingly resilient as may payroll figures surged more than expected and rising stocks caused some to call the start of a fresh bull market the crosscurrents have divided the investing world into roughly two camps those who see a soft landing for the worlds biggest economy and those who envision something far worse for michele who began his career four decades ago the signs are clear the next few months are merely a calm before the storm michele oversees more than 700 billion in assets for jpmorgan and is also global head of fixed income for the banks asset management arm in previous ratehiking cycles going back to 1980 recessions start an average of 13 months after the feds final rate increase he said the central banks most recent move happened in may in that ambiguous period just after the fed has finished raising rates youre not in a recession it looks like a soft landing because the economy is still growing michele said but it would be a miracle if this ended without recession he added the economy will probably tip into recession by the end of the year michele said while the downturns start could get pushed back thanks to the lingering effects of covid stimulus funds he said the destination is clear im highly confident that were going to be in recession a year from now he said other market watchers do not share micheles view blackrock bond chief rick rieder said last month that the economy is in much better shape than the consensus view and could avoid a deep recession goldman sachs economist jan hatzius recently dialed down the probability of a recession within a year to just 25 even among those who see recession ahead few think it will be as severe as the 2008 downturn to start his argument that a recession is coming michele points out that the feds moves since march 2022 are its most aggressive series of rate increases in four decades the cycle coincides with the central banks steps to rein in market liquidity through a process known as quantitative tightening by allowing its bonds to mature without reinvesting the proceeds the fed hopes to shrink its balance sheet by up to 95 billion a month were seeing things that you only see in recession or where you wind up in recession he said starting with the roughly 500basis point rate shock in the past year the pain is likely to be greatest in three areas of the economy regional banks commercial real estate and junkrated corporate borrowers he said michele believes a reckoning is likely for each regional banks still face pressure because of investment losses tied to higher interest rates and are reliant on government programs to help meet deposit outflows he noted i dont think its been fully solved yet i think its been stabilized by government support he said downtown office space in many cities is almost a wasteland of unoccupied buildings he said property owners faced with refinancing debt at far higher interest rates may simply walk away from their loans as some have already done those defaults will hit regional bank portfolios and real estate investment trusts he said given his worldview michele said he is conservative with his investments which include investment grade corporate credit and securitized mortgages everything we own in our portfolios were stressing for a couple quarters of 3 to 5 real gdp he said that contrasts jpmorgan with other market participants including his counterpart rieder of blackrock the worlds biggest asset manager some of the difference with some of our competitors is they feel more comfortable with credit so they are willing to add lowerrate credits believing that theyll be fine in a soft landing he said despite gently ribbing his competitor michele said he and rieder were very friendly and have known each other for three decades dating to when michele was at blackrock and rieder was at lehman brothers rieder recently teased michele about a jpmorgan dictate that executives had to work from offices five days a week michele said now the economys path could write the latest chapter in their lowkey rivalry leaving one of the bond titans to look like the more astute investor