JPMorgan Chase CEO Jamie Dimon said in his annual letter to investors that U.S. inflation may be "stickier" than the market expects. He warned that U.S. inflation and interest rates may still be higher than the market expects due to excessive government spending.
The head of the largest U.S. bank by assets said in his annual letter to shareholders that JPMorgan is prepared for the Federal Reserve to raise interest rates as high as 8% and as low as 2%.
“It’s important to note that the economy has been driven by massive government deficit spending and past stimulus measures,” Dimon wrote. “As we continue to transition to a green economy, restructure global supply chains, increase military spending, and address rising health care costs, the need for additional spending grows.”
“This could lead to more stubborn inflation and higher interest rates than markets expect,” he added.
Dimon's comments on Monday come as financial markets are steadily reducing expectations for how many times the Fed will cut interest rates this year. Markets are pricing in two 25 basis point cuts from the current 23-year high by 2024, with only a 50% chance of a third rate cut, a dramatic reversal from the six to seven cuts expected at the start of the year.
Dimon also warned in the letter that the private credit boom could become an "unexpected risk in the market." He explained that the fast-growing industry is full of "very smart and creative" operators, but "not all participants are that good."
“Problems caused by bad players in private credit could spread to good players, even though private credit money would be locked up for years,” Dimon said. “If investors feel they are being treated unfairly, they will protest, and governments will respond by scrutinizing the industry.” He said it was a “reasonable assumption that at some point regulators will pay as much attention to private markets as they do to public markets.”
Dimon warned that recent geopolitical events "may well create risks greater than anything since World War II," referring to the conflict between Russia and Ukraine and Israel and Palestine. "The consequences of these events should also shatter the idea that America can exist in isolation," Dimon said. "Of course, American leaders must always put America first, but global peace and order are vital to American interests."
Regarding AI, Dimon said JPMorgan is convinced its "results will be extraordinary," and compared the technology's potential impact to that of the printing press, electricity and the internet.
Article forwarded from: Jinshi Data
