‘Beware of higher rates and recession,’ he said.
JPMorgan CEO Jamie Dimon issued a stark warning about the U.S. economy, saying that the risks confronting Americans today may well be the worst since World War II, while cautioning of downside risks that may dash market expectations for an economic “soft landing.”
Mr. Dimon made the remarks in his annual letter to shareholders, in which he said that investors may be overlooking risks as they navigate a complex and dangerous world.
“We may be entering one of the most treacherous geopolitical eras since World War II,” Mr. Dimon wrote, warning that the impacts of major economic and geopolitical forces—from high levels and debt and fiscal stimulus, to the wars in Ukraine and the Middle East—could deliver nasty surprises to markets.
He said he’s worried about the Biden administration’s ongoing deficit spending, the unknown effects of quantitative tightening, the prospect that inflation will stay higher for longer, and the forces of deglobalization.
“The impacts of these geopolitical and economic forces are large and somewhat unprecedented,” Mr. Dimon warned. “They may not be fully understood until they have completely played out over multiple years.”
Inflation, Recession Fears
Even though many economic indicators appear good and may even be improving, including inflation numbers, Mr. Dimon said this could turn out to be little more than a mirage.
“There seems to be a large number of persistent inflationary pressures, which may likely continue,” Mr. Dimon wrote.
Inflation continues to be fanned by factors like ongoing fiscal stimulus, supply chain dislocations as global trade undergoes a major restructuring, remilitarization of the world, and the capital needs of the new green economy, he said.
The deficits of today eclipse those of the past, and what’s different this time around is that fiscal stimulus is taking place during a period of economic expansion rather than to pull the country of a recession.
“I remain more concerned about quantitative easing than most, and its reversal, which has never been done before at this scale,” he said, warning about the unclear impacts of the sharp expansion in the money supply in recent years.
By Tom Ozimek
