Jamie Dimon explains why he’s bracing for an economy with high inflation and unemployment

JP Morgan CEO Jamie Dimon can’t see a way out for the U.S. economy that won’t end in stagnation.

It’s a warning Dimon previously issued as he fears the U.S. will return to the 1970s, a period when everything „felt big” and then quickly returned to unemployment and inflation combined with low demand. Stagnation.”

Appearing at AllianceBernstein’s Strategic Decisions conference on Wednesday, Dimon said he couldn’t see how the massive fiscal and monetary stimulus of the past five years could result in anything but this scenario.

Asked more broadly about the health of the banking sector, Dimon said he and the JPMorgan team were „environmentally planning” for hard and soft landings. The general consensus is that the Federal Reserve will manage a soft landing, and the recession will not end in recession.

„If we have a soft landing and prices stay where they are, go down a little bit—that’s what the world expects and everybody’s fine,” he said.

But the Wall Street veteran refused to wallow in a sense of security for too long, so he countered: „If you have a hard landing, you’re going to see a lot of stress and pressure in the system, from banks to foreign companies. From real estate to wholesale.”

„My view is that if things get bad, it’s going to filter everything right down, and the world is not ready for that,” he said.

Indeed, the general feeling on Wall Street is that 2024 is a relatively soft year. At an attended Goldman Sachs investment event Good luck Last week, a room of investors was asked whether they had a bullish, bearish or neutral view.

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More than half – 53% – said they were positive about the next year, and 39% were neutral. was less than 10%.

Dimon, who will be paid $36 million to lead America’s largest bank through 2023, isn’t so convinced.

„Many of you in this audience have never seen 6% rates on a 10-year bond,” the 68-year-old Wall Street veteran added. „I don’t know why you think it’s not possible. It’s possible. I think the odds are much higher than other people think.

In fact, bond yields have fallen more than 6% in more than two decades, but Before the late 1990s It was practically normal.

The CEO, who recently signaled his intention to leave the top job at JPMorgan within the next five years, said he sees banks preparing for a range of outcomes, such as a higher base rate.

The outlook on rates has been changing rapidly since Wall Street was optimistic earlier this year. In May, Reuters polled more than 100 economists And two-thirds now expect the first rate cut to come in September, whereas a month ago only half believed it would be the first cut. Similarly, 11 economists in the May survey predicted a cut in July and none in June — up from 26 and four, respectively, a month ago.

’Extraordinary Expense’

Dimon, who has led JPMorgan since 2006, has made no effort to hide his concerns about how the U.S. will repay its debts.

Economists argue, and Dimon might agree, that spending has been necessary over the past five years, when in fact America’s debt-to-GDP ratio currently stands at 122%. According to the St. Louis Fed.

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Because of this spending, Dimon believes a nasty „surprise,” stagnation, could come to fruition.

„I’m not saying it’s going to happen, I’m giving the odds more than others,” Dimon added. „I look at the amount of fiscal and monetary stimulus that has happened in the last five years — it’s so extraordinary, how can you say it’s not going to lead to stagnation?”

„It may not be,” he said. „But one thing, I’m very ready for it.”

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