Big risk to US economy, says JPMorgan CEO Jamie Dimon

The head of the country’s largest bank offered a largely upbeat outlook on the health of the economy in his annual letter to shareholders on Monday. Consumers and businesses are cash-strapped, wages are rising and the economy is booming after the pandemic slowdown. While consumer confidence has declined, Mr Dimon says the more important gauge is an uptick in spending.

Yet Mr Dimon warned that the war in Ukraine could clash with rising inflation to slow the recovery of the pandemic and replace global alliances for decades to come.

“They present completely different circumstances from what we have experienced in the past—and their confluence could dramatically increase the risks ahead,” Mr Dimon wrote. “While it is possible, and hopefully, there will be a peaceful resolution to all of these incidents, we must be prepared for possible negative consequences.”

A lot has changed since Mr. Dimon’s last shareholder letter. Last April, as the world emerged from the pandemic, it saw an opportunity for an economic “Goldilocks moment” — rapid, sustained growth in inflation and interest rates as well as a gradual upward move. Instead, growth was accompanied by inflation which was better than expectations.

“After all, the drug … was probably too much and lasted too long,” Mr Dimon wrote in Monday’s letter, referring to pandemic-era stimulus measures that kept consumers afloat and increased borrowing costs. Had less.

Mr Dimon warned that the Federal Reserve could move interest rates “significantly higher than the market expected”. The Fed began raising rates last month and has signaled several more hikes this year, including a possible half a percentage point instead of the traditional quarterly point. next meeting.

“This process will lead to a lot of bottlenecks and a very volatile market,” Mr. Dimon said.

Russia’s war against Ukraine and Western sanctions meant to stop it will “at least” slow the global economy, Mr Dimon said. Oil, commodity and agriculture markets are already spinning, he said. The potential for additional sanctions, which he supports, “could dramatically, and unexpectedly, increase their impact.”

“With the unpredictability of war and the uncertainty surrounding global commodity supply chains, this makes for a potentially explosive situation,” Mr. Dimon said.

He disclosed that JP Morgan could lose about $1 billion over time on its business in Russia.

Mr Dimon renewed his call for a new Marshall Plan, referring to US initiatives to help rebuild Western Europe after World War II. He added that energy investments are particularly necessary to wean the world away from Russian oil and gas. He specifically called on the US to issue permits for oil and gas projects and to increase shipping of liquefied natural gas to Europe.

But Mr Dimon said investing in green energy to ensure current energy needs are met and does not come at the cost of broader efforts to reduce carbon emissions.

“We urgently need to secure an appropriate energy supply for the next few years, which can be done while reducing CO2 emissions,” Mr Dimon wrote.