JPMorgan’s Dimon Warns of Inflation, Political Polarization and Wars Creating Risks Not Seen Since World War II

NEW YORK — The nation’s most influential banker, JPMorgan Chase CEO Jamie Dimon, told investors Monday that he continues to expect the U.S. economy to be resilient and grow this year. But he fears that geopolitical events, including the war in Ukraine and the war between Israel and Hamas, as well as American political polarization, are creating an environment that “could very well create risks that could eclipse anything that has happened.” produced since the Second World War.

The comments came in an annual letter to shareholders from Dimon, which often uses the letter to address broad topics such as politics, regulation and world events and what it could mean for JPMorgan Chase, as well as the economy in general.

Dimon also used his letter to forcefully defend the company’s diversity and equality efforts, pushing back against arguments from Republicans who said such efforts at Fortune 500 companies, colleges and universities were discriminatory and promoted left-wing ideology.

“America’s global leadership role is challenged externally by other nations and internally by our polarized electorate,” Dimon said. “We must find ways to put aside our differences and work in partnership with other Western countries in the name of democracy. In this time of great crisis, coming together to protect our essential freedoms, including free enterprise, is essential. »

Dimon was particularly concerned about the continued deficit of the U.S. government and other countries, as well as the need for countries like the United States to remilitarize and continue building green infrastructure, which will likely keep inflation higher than that of investors. to wait for.

Because of these problems, Dimon said he was less optimistic that the U.S. economy will achieve a “soft landing,” which he defined as modest growth accompanied by a decline in inflation and interest rates. interest, in relation to the market as a whole. While saying investors are pricing in a 70% to 80% chance of a soft landing, Dimon believes the chances of such an ideal outcome are “much lower” than that.

Furthermore, at a time when some investors and economists are wondering whether the Federal Reserve will be able to keep its forecast of three interest rate cuts this year, Dimon warned of the possibility of a rate increase of up to 8% or more. The Fed’s benchmark rate is currently in a range of 5.25% to 5.50%.

“These significant and somewhat unprecedented forces cause us to remain cautious,” he said.

As he has in previous letters, Dimon said he continues to believe the United States must take a global leadership position through trade, military power and a resilient economy supported by strong spending. infrastructure. He has long argued that the United States must continue to play its leadership role in the West, or it will eventually cede that role to China as an authoritarian superpower. This includes continuing to support Ukraine in its war against Russia, Dimon argued.

“Ukraine needs our help immediately, but it is important to understand that much of the money the United States directs to Ukraine is for the purchase of weapons and equipment, most of which will be made in America. Not only does our aid help Ukraine, it goes directly to American manufacturers and helps the country rebuild its military-industrial capacity for the next generation.

Like many other CEOs, Dimon said he sees promise in artificial intelligence use cases. The bank has found 400 use cases for AI so far, Dimon said, particularly in the bank’s marketing, fraud and risk departments. The bank is also exploring the use of AI in software development and general employee productivity plans.

“We are completely convinced that the consequences (of AI) will be extraordinary and perhaps as transformational as some of the major technological inventions of the last centuries: think of the printing press, the steam engine, electricity, computers and the Internet, among others. .”

Of the 61-page letter, Dimon dedicated four pages to the bank’s work on diversity and inclusion. His vocal defense of the bank’s DEI initiatives comes at a time when shareholders and political activists have called such programs a waste of company resources. Dimon argued that JPMorgan — as the nation’s largest bank — should do everything it can to help lift all parts of the economy.

“We believe – and we are not ashamed – that it is our duty to help lift up the communities and countries in which we operate,” Dimon said. “We believe this improves business and the general economic well-being of these communities and countries and also improves long-term shareholder value.”