JP Morgan CEO Jamie Dimon foresees dark clouds looming over the global and U.S. economy in the coming months. The CEO of the largest US bank warns that the national economy will enter recession "in six to nine months", a phase in which Europe is already in. Moreover, he believes the S&P will fall by around another 20% or so, which "could be much more painful" than the 20% the stock market has already lost.
In an interview with CNBC , the executive stressed that there are many factors that will determine the performance of the economy, about which he is pessimistic. Dimon noted that the U.S. economy is "actually still doing well" so consumers may be better off compared to the 2008 financial crisis. "But you can't talk about the economy without talking about things in the future..., and they are serious things," he warned.
Inflation, interest rates and Ukraine
For the CEO, inflation at the highest levels in 40 years, the higher-than-expected rise in interest rates and Russia's invasion of Ukraine are factors that warn of a recession. "These are very, very serious things that I think are likely to push the U.S. and the world - I mean, Europe is already in recession - and are likely to put the U.S. into some sort of recession six to nine months from now," Dimon said.
The executive acknowledged that he could not say for sure how long a recession in the U.S. could last. "It can go from very mild to quite harsh and a lot will depend on what happens with this war. So I think guessing is difficult: be prepared."
Criticism of the Fed over inflation
The other two aspects of the recession go hand in hand. According to Dillon, the Fed "waited too long and did too little" with runaway inflation. However, he said, "it is clearly catching up. From here, let's all wish them success and cross our fingers that they manage to slow the economy enough so that, whatever it is, it is mild, and this is possible," Dimon analyzed.
The Fed's interest rate hike is also taking its toll on the markets. Dimon noted that the S&P has already fallen 20%, and has not yet bottomed out. You may have a ways to go. It really depends on whether there will be a soft landing or hard landing, and since I don't know the answer to that it's hard to answer...it could be another 20% easy."
S&P could lose "another 20% easy
In addition, "The next 20% could be much more painful than the first. For rates to go up another 100 basis points will be much more painful than the first 100 because people are not used to it, and I think negative rates, when all is said and done, will have been a complete failure," the CEO analyzed.
In view of this situation, the executive acknowledged that the bank has already begun to "be very conservative" with its lending standards. "JPMorgan is gearing up and we're going to be very conservative with our balance sheet," he noted. The bank is expected to present its quarterly results next Friday, October 14.