Jamie Dimon, head of the world’s largest bank, JPMorgan Chase, has said he cannot rule out a “hard landing” for the US economy.
A ‘hard landing’ occurs when there is a clear economic slowdown after a period of rapid growth.
When asked about the worrying prospect during a CNBC During an interview this morning, Dimon said, “Can we actually see one? Of course, how can anyone who reads history say there is no chance?’
America’s most influential banker also said the worst outcome for the US economy would be “stagflation” – which is when inflation continues to rise but unemployment is high and growth is slowing.
Economists consider stagflation, last seen in the US in the 1970s, as worse than a recession. It would drive down stock prices, hitting 401(K)s and other retirement savings.
The billionaire banker chimed in another interview Last month he worried that the US economy is “more like the 1970s than we’ve ever seen before.”
Dimon’s warning comes after an analyst working for him at JPMorgan warned that the stock market could soon become volatile despite hitting record highs this year.
JPMorgan Chase CEO Jamie Dimon has said he cannot rule out a ‘hard landing’ for the US
Since taking over in 2006, Dimon, 68, has turned JPMorgan – which has both retail and investment arms – into the world’s largest and most powerful bank with $4 trillion in assets.
Speaking at the JPMorgan Global China Summit in Shanghai, Dimon said: “I look at the varied outcomes and again, the worst outcome for all of us is what you call stagflation, higher interest rates and recession.
“That means corporate profits will fall and we’ll get through that. I mean, the world survived that, but I think the odds have been greater than other people think.”
Despite this, he says consumers are in “pretty good shape” at the moment and will continue to be so if the economy enters a recession.
“Unemployment has been below 4 percent for a year and a half to two years now,” he said.
‘Wages are rising on the low side, which I think is a very good thing. House prices have risen, stock prices have risen. Even if we go into a recession, they’ll be in pretty good shape.”
He added that consumer confidence is low, which he believes is mainly due to inflation.
The recently released minutes of the Federal Reserve’s latest meeting show that policymakers are becoming increasingly concerned about inflation. Some members indicated that there was a lack of confidence in lowering interest rates and easing monetary policy.
The central bank voted earlier this month to keep interest rates stable at a 23-year high of between 5.25 and 5.5 percent.
Dimon told CNBC that he thinks interest rates could still rise “a little bit.”
‘I think inflation is more persistent than people think. “I think the odds are better than other people think, especially since the enormous amount of fiscal monetary stimulus is still in the system and may still be driving some of this liquidity,” he said.
The Federal Reserve voted to keep interest rates steady at their current 23-year high at its last meeting earlier this month
According to the CME FedWatch Tool, about half of analysts predict a 25 basis point rate cut by September.
The central bank has previously forecast a three-quarters of a percent cut for all of 2024, but has repeatedly emphasized that this will only happen if there is confidence that inflation will move sustainably toward the 2 percent target.
But Dimon cautioned that while market expectations are “pretty good, they are not always right.”
He added: “The world said [inflation] would remain at 2 percent all the while. Then it says it’s going to 6 percent, and then it says it’s going to four… It’s been 100 percent wrong almost every time. Why do you think this time is right?’
Higher inflation and higher interest rates are generally bad for the stock market. They ensure that consumers spend less, while it also becomes more expensive for companies to borrow money.
A hard landing and recession would shock stock markets.
Dimon’s comments come after JPMorgan’s chief market strategist Marko Kolanovic issued a note on Monday predicting the S&P 500 could fall 20 percent to 4,200 points by the end of the year.
Kolanovic urged investors not to turn bullish despite the Dow Jones Industrial Average crossing the 40,000-point threshold for the first time last week
The S&P 500 also rose to 5,297 on Friday, marking 23 record highs so far this year – exciting Americans with 401(K)s with funds invested in the stock market.
JPMorgan chief market strategist Marko Kolanovic urged investors not to turn bullish despite the stock market hitting record highs this year
Kolanovic published a note on Monday predicting that the S&P 500 could fall 20 percent to 4,200 points by the end of the year.
Most Americans have at least a portion of their 401(K) and individual retirement accounts invested in the Dow Jones, the S&P 500 and the Nasdaq.
They have benefited from a booming stock market over the past twelve months, and especially since the start of this year.
Kolanovic reasoned that interest rates are likely to remain remaining in restricted areas for longer, combined with lower-income consumers showing signs of weakness and high levels of geopolitical uncertainty, according to Business insider.
“With very high equity valuations, we do not currently view equities as attractive investments and see no reason to change our position,” Kolanovic said.
However, he is fast becoming the exception among big bank analysts after Morgan Stanley’s Mike Wilson – the only other notable bear left on Wall Street – turned bullish earlier this week.
Wilson, known as one of Wall Street’s most prominent pessimists, said he now sees the S&P 500 rising 2 percent by June 2025 — a big reversal from his previous prediction that the index would rise by the end of the year would plummet by 15 percent. .
