Why the Raymond James CEO sees a soft landing ahead

Raymond James Financial CEO Paul Reilly (RJF) joins Yahoo Finance Live to discuss the impact of rising rates, Fed policy, and the U.S. economy.

He predicts the U.S. will avoid a recession.

"It's hard to have a really big recession when everyone who wants to work can work and wages are going up," Reilly said. "The soft landing scenario is where I would land."

Click here to watch the full interview on the Yahoo Finance YouTube page or you can watch this full episode of Yahoo Finance Live here.

Video Transcript

PAUL REILLY: There's no doubt that interest rates are slowing the economy. And those impacts haven't really worked through the economy, you look at housing, and you would say that sales would have slowed down a lot, prices would come down with these rates, hasn't started really yet. Corporations who had, generally, a lot of cash, haven't had to go and refinance with a much more expensive debt rates. So it will slow down the economy.

The question is, will it be a recession, and will it be a bad recession. And I think the short answer for me is, it's hard to have a really big recession, when everyone who wants to work can work, and wages are going up. So I think the soft landing scenario is where I would land, but certainly we're at an inflection point on what the Fed continues to do, or stops doing.

SEANA SMITH: So Paul, if we do see that soft landing scenario that sounds like is what you're expecting, at least at this point, what does that then mean for Raymond James?

PAUL REILLY: I think it's the same thing, I look at the client sentiment today, and over half the clients don't have confidence in the equity markets right now, 80% have confidence in achieving their plan, and 95%, good news is they like their advisors, so part of advice is working people through these downturns, it isn't always an up market. So it's not a lot of change, we have double the amount of capital to be well-capitalized required by the Fed, we have twice the amount of cash we need to be highly liquid, so we will go through the cycles.

So for us, it's still focusing on the long-term for Raymond James, and, more particularly, is focusing our advisors, focusing on clients' long-term investment plans. So, as of right now, yeah, we could have a downturn, but those tend to be cyclical. And the question is, like the company, advisors should be saying for their clients, what's the right path for you in the long-term. So it doesn't change much right now.

BRAD SMITH: Are you anticipating that that downturn would be shallow or mild, how are you quantifying it, if you will?

PAUL REILLY: And so it depends on my hat, as a CEO in a company that's been through deep cycles being profitable, like '09 we made money every quarter. I'm paid to be a pessimist, but my personal outlook is I think it will be a shallow recession. But from company planning, we always say, what happens if it gets worse.

But I think it will be a shallow dip. And the question is, how long? We've had periods of stagflation before inflation, because of supply chain, and other issues doesn't really come down, and the economy's not growing, you through tough periods too. So you don't know, but personal guess is more of a shallow slowdown for a period of time, and then an increase, but any scenario, you could argue.