Dimon speaks of storm clouds at investor day
The JPMorgan CEO’s concerns appear to have increased
Warning of a hurricane for the economy
Dimon first speaks of thunderclouds that could dissolve
Earlier in May, JPMorgan CEO Jamie Dimon said the US economy had a 33 percent chance of avoiding a recession. However, as Fortune reports, he said at JPMorgan’s investor day: “When we go into a recession, it can be different than in previous recessions.” He pointed out that while rising inflation and interest rates are driving the US economy like storm clouds headed for the storm, they could dissipate or the collision might not be too bad. “I call them cumulonimbus clouds because they’re cumulonimbus clouds. They might dissipate,” Fortune quotes Dimon, who added that the clouds don’t look like they might be a “hurricane” or a “tsunami” like they were before the last great recession in 2008, cause.
JPMorgan CEO now warns of impending hurricane
However, the JPMorgan boss now sees things differently: At a financial conference in New York, Dimon explained that he was preparing the largest US bank for an economic hurricane on the horizon and warned investors that they should prepare themselves. “You know, I said there are storm clouds, but I’m going to change it, it’s a hurricane,” corrects the JPMorgan CEO himself can handle,” Dimon said, but the “hurricane is out there down the road, coming toward us” and no one knows if the hurricane is “a minor or super storm Sandy.”
Those are the two main reasons for Dimon’s concern
Dimon is concerned about two things in particular: the US Federal Reserve’s quantitative tightening (QT) and the Ukraine war. The Fed has signaled that it will reverse its bond purchase program and shrink its balance sheet. That quantitative tightening is set to begin this month and ramp up to $95 billion a month in reduced bond holdings. “We’ve never had a QT like this, so you’re watching something you could make history books about 50 years from now,” CNBC quoted Dimon as saying. Several aspects of the quantitative easing programs – including negative interest rates, which Dimon called a “big mistake” – have backfired and now central banks “have no choice because there is too much liquidity in the system,” Dimon said of the tightening USmonetary policy. “They have to remove some of the liquidity to stop speculation, bring house prices down and stuff like that.”
In addition, the JPMorgan CEO is clearly concerned about the Ukraine war and its impact on commodities, including food and fuel. Oil should “almost go up in price” due to the disruptions caused by the Ukraine war, according to Dimon, possibly reaching $150 or $175 a barrel. “Wars get bad [sie] going south with unintended consequences,” said Dimon. “We are not taking the right measures to protect Europe from what will happen to the oil in the short term.”
This is how JPMorgan is reacting to the approaching crisis
In any case, Dimon expects a “huge shift in the flow of money around the world” and said he doesn’t know what the impact will be, but he is “at least prepared for tremendous volatility.” And so JPMorgan is also arming itself and will be very conservative with its balance sheet. “With all this capital uncertainty, we have to take action,” Dimon said, according to CNBC. “I kind of want to shed non-operating deposits, which is something we can do to protect ourselves so we can serve clients in bad times. That’s the environment we’re dealing with.” According to Dimon, banks with “fortified balance sheets” and conservative accounting are the best protection against a downturn.
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