JPMorgan Chase boss Jamie Dimon warned of an “uncertain” year ahead on Friday, citing challenges like inflation and geopolitical tensions that threaten the US economy.
The warning came after JPMorgan, the nation’s biggest bank by assets, reported a modest 6% rise in profit in the first quarter. Shares slid 6.5% to $182.79 amid a major selloff on Wall Street.
“Many economic indicators continue to be favorable. However, looking ahead, we remain alert to a number of significant uncertain forces,” Dimon said, citing the wars in Gaza and Ukraine as well as other geopolitical pressures, high amounts of government spending and “persistent inflationary pressures” as part of an “unsettling” global landscape.
Dimon – who famously predicted a “hurricane” could hit the economy in 2022, a forecast that never came to pass – wasn’t all doom and gloom.
“The American economy is strong,” he said on the conference call. “Consumers still have excess money. Stock prices are up.”
JPMorgan turned a profit of $13.42 billion, or $4.44 a share, for the three-month period ended March 31 – up from $12.62 billion, or $4.10 a share, in the same period in 2023, when the Wall Street behemoth made a record nearly $50 billion in profits.
Other big banks that reported earnings Friday didn’t fare as well.
Citigroup saw its profits drop 27% from a year earlier, as the bank continues to restructure itself and slim down after selling off much of its international franchises post pandemic. Citi shares dropped 1.7%.
Wells Fargo’s profit fell 7% in the first quarter as it paid more to hold customer deposits while demand from borrowers declined. The bank’s shares fell less than 1%.
Dimon reiterated caution about the economy that he shared in his annual shareholder letter earlier this week.
In that note, Dimon said US interest rates could surge to more than 8% in the coming years thanks to “huge fiscal spending, the trillions needed each year for the green economy, the remilitarization of the world and the restructuring of global trade.”
Dimon told investors that bets the Federal Reserve will pull off a “soft landing” — by cooling inflation without setting off a recession – are overblown.
“These markets seem to be pricing in a 70% to 80% chance of a soft landing,” Dimon wrote in his note. “I believe the odds are a lot lower than that.”
“Economically, the worst-case scenario would be stagflation,” which would see the economy staying stagnant and “would not only come with higher interest rates but also with higher credit losses, lower business volumes and more difficult markets,” he added.
Dimon’s note came shortly before the latest inflation figures showed that US inflation spiked to 3.5% in March.
The reading – along with March’s surprisingly resilient jobs report that said employers increased their payrolls by a staggering 303,000 last month – is yet another data point that throws cold water on the Fed’s rate-cooling timeline.
Dimon has long been warning about the future of the economy. In 2022, he said of America’s financial situation: “That hurricane is right out there, down the road, coming our way. We just don’t know if it’s a minor one or Superstorm Sandy or Andrew or something like that. You better brace yourself.”
Since then, the Israel-Gaza war has broken out, policymakers have been unsuccessful in tamping inflation down closer to their 2% goal and interest rates have been lifted to their current 23-year high, between 5.25% and 5.5%, as a result.
However, the US economy has hummed along.
More recently, Dimon in January likened the economic situation to a cliff, but said there’s another decade before the nation enters a financial crisis.
“It’s a cliff, we see the cliff. It’s about 10 years out, we’re going 60 miles an hour [toward it],” the 68-year-old JPMorgan chief told Fox while also sounding the alarm on US debt.
Today, the debt-to-GDP ratio is above 100% — 123% to be exact, per the International Monetary Fund — and is projected to reach 130% by 2035.
Consensus among traders is that the Fed will now hold off until September rather than July before it slashes rates from their current 23-year-high. Economists are also widely predicting there to be just two quarter-point cuts instead of three.
With Post wires