- Markets are too optimistic about a soft landing, JPMorgan chief Jamie Dimon told the Wall Street Journal.
- He expects the chances of a soft landing to be half of what markets are pricing in.
- “Don’t be lulled into a false sense of security because today is looking good.”
Things are not looking particularly rosy for the markets and the economy, Jamie Dimon said in an interview with the Wall Street Journal.
“The chances of a soft landing, market prices being 70%. I think it’s half of that,” the JPMorgan boss said. “It feels a little more like the ’70s to me, and I point out to a lot of people that things seemed pretty rosy in 1972 – they weren’t in 1973.”
Dimon was referring to the American downturn at that time, when an oil crisis sent inflation soaring and a recession set in, a dire situation known as stagflation.
But this time around, Dimon sees different reasons why markets should remain cautious.
This includes massive budget deficits and future drivers of inflation, from green energy initiatives to global rearmament. Dimon also remains cautious about the Federal Reserve’s efforts to shrink its balance sheet, saying no one knows the full effects.
“Don’t be lulled into a false sense of security because today looks good, that tomorrow everything will be fine,” he said.
For now, the economy is visibly strong, Dimon said, and consumers remain in good shape. But even that portends trouble ahead, given how much the economy now depends on fiscal spending for its own success.
“The deficit represents 6% of GDP, or almost $2 trillion,” he said. “That explains a lot of this growth and it will have other consequences, perhaps later, called inflation, which may not go away as people expect.”
Once these problems take hold, they will likely persist for the long term, extending into 2025 and 2026, Dimon warned.
His latest comments are another in a series of warnings Dimon has issued over the past month. In his April letter to shareholders, the CEO also warned of market optimism, following a similar outlook during JPMorgan’s earnings conference call.
businessinsider
