May 29, 2024
Money

America’s most influential banker sounds alarm on ‘uncertain’ year ahead and claims markets are ‘too happy’ and chances of it turning bad are ‘higher than people think’ – so is your money safe?


JPMorgan boss Jamie Dimon has warned of an ‘uncertain’ year ahead when it comes to finance – painting markets as ‘too happy’ and poised for a downturn. 

The remarks, aside from serving as a sort of double-down on warnings aired by the CEO in recent days, came just after the firm released results for the first financial quarter.

The US’s biggest bank had just reported a slight rise of 6 percent in profit – though shared slid 6.5 percent Friday, somewhat coinciding with Dimon’s word of caution.  

Citing an ‘unsettling’ global landscape rife with war and inflation, he said that ‘the chance of bad outcomes is higher than people think.’  

The prominent financial figure has previously expressed concern over the Fed‘s quest to curb inflation, and last month was part of a coalition of billionaires who suddenly sold millions in blue-chip stocks – sparking fears of a financial disaster.

JPMorgan boss Jamie Dimon on Friday warned of an 'uncertain' year ahead when it comes to finance- characterizing markets as 'too happy' and poised for a potential downturn.

JPMorgan boss Jamie Dimon on Friday warned of an ‘uncertain’ year ahead when it comes to finance- characterizing markets as ‘too happy’ and poised for a potential downturn.

Dimon, 67, sold $150 million of his JPMorgan stake this past week, in his first cash-out since taking the reins at the bank nearly two decades ago

Dimon, 67, sold $150 million of his JPMorgan stake this past week, in his first cash-out since taking the reins at the bank nearly two decades ago

‘Many economic indicators continue to be favorable,’ Dimon, 67, said after announcing the first-quarter earnings results for 2024 Friday 

‘However, looking ahead, we remain alert to a number of significant uncertain forces.’ 

He said an ‘unsettling’ global landscape – including ‘terrible wars and violence’ – is to blame, along with ‘persistent inflationary pressures, which will likely continue.

‘We do not know how these factors will play out, but we must prepare the firm for a wide range of potential environments,’ he went on – claiming those preparations will be ‘to ensure that [JPMorgan Chase] can consistently be there for clients.’

Dimon proceeded to pivot to another one of his favorite subjects – the Federal Reserve’s other quest to draw down the assets it is holding on its $7.5 trillion balance sheet, a lesser-known tool the bank has been using to keep a handle on financial conditions.

The process seeks to reduce the level of Treasuries and mortgage-backed securities the central bank is holding. allowing up to $95 billion in proceeds from maturing bonds to roll off monthly rather than reinvesting them.

This has resulted in a $1.5trillion contraction in holdings since June 2022, and some slight alleviation in inflationary pressures.

The Fed is expected to slow down the pace of such quantitative tightening in the next few months – which, combined with wars like the one in Israel and other tenuous geopolitical conditions, paves the way for a period of unknown as well, Dimon said.

The US' biggest bank had just reported a slight rise of 6 percent in profit - though shared slid 6.5 percent Friday, in a move that somewhat coincided with Dimon's word of caution.

The US’ biggest bank had just reported a slight rise of 6 percent in profit – though shared slid 6.5 percent Friday, in a move that somewhat coincided with Dimon’s word of caution.

‘We have never truly experienced the full effect of quantitative tightening on this scale,’ Dimon said.

But still, ‘the American economy is strong,’ he asserted on the conference call, adding that ‘consumers still have excess money [and] stock prices are up.’ 

That said, he concluded investors are underrating the potential for an economic collapse.

‘You have to ask the question: What if other things happen, like higher rates, or a modest recession, etc., and then all these numbers change?’ he said. 

‘I just don’t think any of us should be surprised if and when that happens.’

Meanwhile, it’s not the first time the billionaire cried wolf in regards to the US economy, notoriously stating that a ‘hurricane’ could hit it come 2022 the year before.

That forecast, fortunately, never came to pass – and as Dimon on Friday mentioned, the state of the country when it comes to its financial health is currently strong.

The warning came alongside a stark selloff on Wall Street, during which the Dow tumbled some 475 points after weak earnings from several of JPMorgan's competitors

The warning came alongside a stark selloff on Wall Street, during which the Dow tumbled some 475 points after weak earnings from several of JPMorgan’s competitors

However, that didn’t stop the stark selloff that occurred almost simultaneously with Dimon’s call – during which the Dow tumbled some 475 points after weak earning reports from several of JPMorgan’s competitors.

The S&P 500 also dropped 1.5 percent, by more than 75 points, while the Nasdaq was down 267 points, or 1.6 percent.

Oil prices also rose above $90-a-barrel – likely due to threats from Iran that it will wage attacks against Israel as early as this weekend.

Banks like CitiGroup appeared to get the memo, experiencing stark drops in the double digits before trading was through at 5pm. 

JPmorgan, however, was seemingly spared, though shares dropped later in the day – likely due to a lukewarm forecast involving income from interest payments issues alongside the positive earnings, which fell short of analysts’ expectations.

On Monday, Dimon aired caution about the economy in a letter sent to JPMorgan shareholders, in which he said US interest rates could surge in the coming years due to to ‘huge fiscal spending.’ 

Like he would later in the week, he also pointed to Russia’s invasion of Ukraine and the Israel-Hamas war as reasons for concern of a prospective economic pitfall.

The nation's most influential banker, meanwhile, pointed to Russia's invasion of Ukraine and the Israel-Hamas war , as well as US political polarization, as reasons for concern (file image shows Ukrainian servicemen)

The nation’s most influential banker, meanwhile, pointed to Russia’s invasion of Ukraine and the Israel-Hamas war , as well as US political polarization, as reasons for concern (file image shows Ukrainian servicemen)

Smoke billows after a strike by Israel on Gaza City. Economists are watching the conflict closely to see how it affects global trade and commodities

Smoke billows after a strike by Israel on Gaza City. Economists are watching the conflict closely to see how it affects global trade and commodities

‘The fallout from these events should also lay to rest the idea that America can stand alone,’ Dimon wrote, referring to the wars and the instability between nations it has bred.

‘Of course, US leaders must always put America first, but global peace and order are vital to American interests,’ he went on.

‘America’s global leadership role is being challenged outside by other nations and inside by our polarized electorate.

‘We need to find ways to put aside our differences and work in partnership with other Western nations in the name of democracy. 

During this time of great crises, uniting to protect our essential freedoms, including free enterprise, is paramount.’

The warning, again, also  expressed worry over large amounts of deficit spending from the federal government, as well as a need for countries such as the US to remilitarize and continue to build out green infrastructure, 

If not, he forecasted that inflation will rise higher than investors expect, weeks after selling off some $150million in JPMorgan stock back in March -his first cash-out since taking the reins at the bank nearly two decades ago.

And he was not the only one – with figures like  Apollo Global Management’s Leon Black, Walmart ‘s Walton family, Jeff Bezos and Mark Zuckerberg seemingly following suit.

If something is not done, Dimon said that inflation will rise higher than investors expect, weeks after selling off some $150million in JPMorgan stock back in March - his first cash-out since taking the reins at the bank nearly two decades ago

If something is not done, Dimon said that inflation will rise higher than investors expect, weeks after selling off some $150million in JPMorgan stock back in March – his first cash-out since taking the reins at the bank nearly two decades ago

And he was not the only one - with figures like Apollo Global Management's Leon Black following suit. Day's after Dimon's sale, he also enacted his first-ever, shedding $172.8million in his equity firm after 34 years

And he was not the only one – with figures like Apollo Global Management’s Leon Black following suit. Day’s after Dimon’s sale, he also enacted his first-ever, shedding $172.8million in his equity firm after 34 years

Walmart 's Walton family, meanwhile, sold $1.5billion in a week, bringing its total sale proceeds to $2.3billion since December. Alice Walton, the 73-year-old heir to retail dynasty, is seen here.  Worth about $66.5billion, she is the richest woman in the US

Walmart ‘s Walton family, meanwhile, sold $1.5billion in a week, bringing its total sale proceeds to $2.3billion since December. Alice Walton, the 73-year-old heir to retail dynasty, is seen here.  Worth about $66.5billion, she is the richest woman in the US

Jeff Bezos - seen here with fiancé Lauren Sanchez - unloaded $8.5billion in Amazon shares last month, furthering fears of economic uncertainty

Jeff Bezos – seen here with fiancé Lauren Sanchez – unloaded $8.5billion in Amazon shares last month, furthering fears of economic uncertainty

Mark Zuckerberg - the world's fourth-richest man behind Bezos, Bernard Arnaut and Elon Musk - sold roughly 1.4 million Meta shares worth roughly $638million, all since the end of 2023

Mark Zuckerberg – the world’s fourth-richest man behind Bezos, Bernard Arnaut and Elon Musk – sold roughly 1.4 million Meta shares worth roughly $638million, all since the end of 2023

Donald Trump, the current GOP frontrunner

Joe Biden, the likely Democratic candidate

Experts this theorized that the the stock sales could be the result of the looming 2024 election – and likely faceoff between Donald Trump and Joe Biden. In an interview with Fortune,  one expert said such contention could lead to a financially volatile fall

Because of these issues, Dimon said he is less optimistic that the US economy will achieve a 'soft landing,' which he defined as modest growth along with declining inflation and interest rates, compared to the broader market

Because of these issues, Dimon said he is less optimistic that the US economy will achieve a ‘soft landing,’ which he defined as modest growth along with declining inflation and interest rates, compared to the broader market

Within days from Dimon’s sale, Black also enacted his first-ever stock dump, shedding $172.8million in his equity firm after 34 years. 

The  Walton family – presided over by 73-year-old Alice Walton – sold $1.5billion in a week, bringing its total sale proceeds to $2.3billion since December. Walton is the richest woman in the world.

Bezos – the third-richest man behind Louis Vuitton’s Bernard Arnaut and Elon Musk – unloaded $8.5billion in Amazon shares this month alone.

Mark Zuckerberg – the fourth-richest – sold about 1.4 million Meta shares worth roughly $638million. 

Experts afterwards theorized the sales could be the result of the looming election, and as the S&P 500 index – a decent measure of the larger economy – remains at an all-time high.

‘If you’re reading the tea leaves and looking at what may happen with our politics in the next year or so, things are pretty good right now – the markets are up,’ finance firm consultant Alan Johnson told Fortune late last month.

Echoing claims that would eventually be aired by Dimon, he added: ‘With our politics and everything else going on geopolitically, maybe it won’t be as good a year from now or two years from now,’ he conceded.

Because of these issues, Dimon, on Monday, said he is less optimistic that the US economy will achieve a ‘soft landing,’ 

He defined such an event as modest growth – along with declining inflation and interest rates compared to the broader market.



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