Jamie Dimon says rates could spike to 8%, AI akin to the printing press
Apr. 08, 2024 6:45 AM ET
By: Kim Khan, SA News Editor
 Alex Wroblewski/Getty Images News
JPMorgan Chase (NYSE: JPM) CEO Jamie Dimon says the markets should be prepared for more turbulence than what is currently priced in.
In his annual letter to shareholders, Dimon cast doubt on the confidence that the U.S. economy will see a soft landing - and the corresponding equity valuation.
"Equity values, by most measures, are at the high end of the valuation range, and credit spreads are extremely tight," Dimon wrote. "These markets seem to be pricing in at a 70% to 80% chance of a soft landing — modest growth along with declining inflation and interest rates."
"I believe the odds are a lot lower than that," he said. "In the meantime, there seems to be an enormous focus, too much so, on monthly inflation data and modest changes to interest rates. But the die may be cast."
He pointed to "huge fiscal spending, the trillions needed each year for the green economy, the remilitarization of the world and the restructuring of global trade" as contributors to inflation.
"I’m not sure models could pick this up."
"Small changes in interest rates today may have less impact on inflation in the future than many people believe," Dimon said. "Therefore, we are prepared for a very broad range of interest rates, from 2% to 8% or even more, with equally wide-ranging economic outcomes — from strong economic growth with moderate inflation (in this case, higher interest rates would result from higher demand for capital) to a recession with inflation; i.e., stagflation."
The worst-case economic scenario would be stagflation, he added.
On AI, Dimon said that while its full effect on banking or society isn't known "we are completely convinced the consequences will be extraordinary and possibly as transformational as some of the major technological inventions of the past several hundred years: Think the printing press, the steam engine, electricity, computing and the Internet, among others." |
