JPMorgan Chase CEO Jamie Dimon believes “this may be the most dangerous time the world has seen in decades.”
He said as much in a statement released Friday alongside his company’s earnings news release.
“Currently, U.S. consumers and businesses generally remain healthy, although, consumers are spending down their excess cash buffers. However, persistently tight labor markets as well as extremely high government debt levels with the largest peacetime fiscal deficits ever are increasing the risks that inflation remains elevated and that interest rates rise further from here,” the statement reads.
“Additionally, we still do not know the longer-term consequences of quantitative tightening, which reduces liquidity in the system at a time when market-making capabilities are increasingly limited by regulations. Furthermore, the war in Ukraine compounded by last week’s attacks on Israel may have far-reaching impacts on energy and food markets, global trade, and geopolitical relationships,” it continues.
“While we hope for the best, we prepare the Firm for a broad range of outcomes so we can consistently deliver for clients no matter the environment. To conclude, I want to thank our extraordinary employees for all of their hard work in making us one of the most trusted financial institutions in the world,” it concludes.
His remarks come amid growing fears of a recession.
“Wall Street’s great debate of 2023 — whether the U.S. economy is headed for a recession — is resurfacing amid escalating unrest in the Middle East. Heightened geopolitical risk, along with unabating inflationary pressures, surging bond yields, and the Federal Reserve’s ‘higher for longer’ vision, has business leaders bracing for a contraction,” Yahoo News reported Saturday.
“There’s a lot of fog on the horizon,” KPMG U.S. CEO Paul Knopp told the outlet.
Indeed, a recent survey by The Conference Board found that 72 percent of CEOs are prepping for a potential recession within the next 12 to 18 months.
“Of those, 69% expect a brief and shallow recession, with limited global spillovers, and only 3% are preparing for a deep US recession,” Conference Board trustee Roger W. Ferguson Jr. said in a statement.
Meanwhile, in an earnings release of its own, Citigroup CEO Jane Fraser said Friday that consumers are “increasingly cautious.”
“Fraser’s note of cracks beginning to form in consumer spending is something that’s been highlighted recently. Constellation Brands (STZ) CEO Bill Newlands told Yahoo Finance Live this week that shoppers are already ‘spending a little less’ while being more ‘careful’ about what they buy,” Yahoo News notes.
“The reason this is problematic is because the resilient consumer has helped the U.S. economy defy recession predictions so far this year, as consumer spending accounts for nearly 70% of U.S. GDP,” according to Yahoo News.
Yet consumer sentiment reportedly plunged in October to its lowest level in months, driven, according to Yahoo News, by Americans expecting even more inflation next year.
Consumer sentiment tumbles for Oct as record 49% of respondents say high prices eroding living standards and inflation expectations skyrocket – Fed has completely lost the expectations fight and has to hike rates again next meeting… pic.twitter.com/tFjeHDCUG1
— E.J. Antoni, Ph.D. (@RealEJAntoni) October 13, 2023
“And sticky inflation is not just an issue for consumers, but for the Fed too. The latest data from the Bureau of Labor Statistics showed prices held steady at 3.7% in September, well above the Fed’s goal of 2%,” Yahoo News notes.
“With the Fed committed to returning inflation back to its long-run target of 2%, this would raise the odds of rate increases this year, extend the duration of restrictive monetary policy, and increase the chances of a recession occurring down the road,” Oxford Economics lead US economist Michael Pearce reportedly wrote in a note to clients this week.
The last factor to keep in mind is the warnings of Michael Kantrowitz, the chief investment strategist at Piper Sandler — and a guy whom Insider describes as “one of the most accurate Wall Street strategists.”
“In a recent note to clients, Kantrowitz highlighted unemployment claims data leading up to the Great Recession. Taking the data as it was reported then, claims didn’t look like they started on an uptrend until February of 2008. But looking at the revised data, a clearer trend starts in September of 200,” according to Insider.
“Initial data shows that jobless claims were under 300,000 in September 2007, then rose to around 350,000 in November before falling back to around 300,000 in January 2008. In the revised data, jobless claims went from a little above 300,000 in September 2007 to 360,000 in December, and fell to 320,000 in January 2008 before ticking back upward. Basically, the revised data is less volatile and shows a clearer uptrend,” Insider notes.
Why is this important? Because of what it portends for the future.
“If you look at claims back in 2007 and 2008 you’ll see a VERY different story from today’s revised data compared to what investors knew AT THE TIME,” he explained in his recent note.
Writers and editors can be contacted at [email protected] with feedback, tips, or corrections.
V. Saxena is a staff writer with a decade of experience as a professional writer, and a lifetime of experience as an avid news junkie. He holds a degree in computer technology from Purdue University. Saxena also contributes to BizPac Review.
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