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“I said there are storm clouds, but…it’s a hurricane,” Jamie Dimon, chair and CEO of JPMorgan Chase, the richest U.S. bank, said of the nation’s economic outlook last week at the Bernstein Strategic Decisions Conference.
“Right now…everyone thinks the [U.S. Federal Reserve] can handle this [inflation],” he said, but “that hurricane is coming our way. We just don’t know if it’s a minor one or a Superstorm Sandy.”
Dimon had said in May that a storm was brewing but it might just as easily clear up quickly. His comments were credited with shoring up investors’ confidence and even bumping up his bank’s share price.
Now he has altered his forecast.
“You better brace yourself,” he added.
JPMorgan already has prepared, setting aside $900 million in the year’s first quarter to cover loans that might go bad in the storm ahead, as we reported in “JPMorgan Profits Down 42 Percent on $900-Million Set-Aside” (26 Apr 2022).
Dimon attributes the looming heavy weather to the Fed’s plan to steadily raise interest rates through the rest of the year.
The central bank also has ended its $120-billion monthly bond purchases and is letting current holdings fall out of its $9-trillion portfolio as they mature.
The end of the Fed’s purchases, which began in 2008 as the Great Recession set in, deprives the market of liquidity to which investors have become accustomed. That could make markets more volatile, the Financial Times noted.
William Demchak, a JPMorgan alumnus and now CEO of PNC bank, which holds about $540 billion in assets, offered the conference “no weather forecasts” but agreed that the future is darker than the present.
“I don’t think it’s going to be a hurricane,” he said, but “I don’t see any possible outcome other than a recession.”
TREND FORECAST: Mr. Dimon’s forecast is old news for Trends Journal subscribers. However, what is essential in his and others’ vocal declarations of economic danger ahead, is that it is coming from the top of the economic pyramid. Therefore, being that they are on the top of the inside of the banking world and know what is actually going on, for Dimon to make such statements should be taken very seriously.
Simply stated: The Worst is Yet to Come.