JPMorgan Chase CEO Jamie Dimon said on Wednesday that his company is hunkering down for a looming economic “hurricane.”
The executive’s comments come amid news that the United States economy shrank at a 1.5% annualized rate in the first quarter of 2022. The economy following COVID-19 and the lockdown-induced recession has been troubled by various phenomena — including persistent inflation, high gas prices, and the Russian invasion of Ukraine.
“You know, I said there’s storm clouds but I’m going to change it… it’s a hurricane,” Dimon said Wednesday at a financial conference in New York, according to CNBC. He added that no one knows if the hurricane is “a minor one or Superstorm Sandy.”
“Right now, it’s kind of sunny, things are doing fine, everyone thinks the Fed can handle this,” Dimon said. “That hurricane is right out there, down the road, coming our way.”
Indeed, the Federal Reserve hiked interest rates by 0.5% earlier this month — the largest rate increase since May 2000 — to curb rising price levels. The move followed a 0.25% rate hike from near-zero levels two months ago. On Tuesday, President Joe Biden met with Fed Chair Jerome Powell to signal his support for the tighter monetary policy — and to show that he is likewise serious about fighting high prices.
With respect to Fed policy, Dimon argued that the central bank does not “have a choice” because “there’s too much liquidity in the system.” Rolling back monetary stimulus is necessary to “remove some of the liquidity” and “stop the speculation, reduce home prices.”
Although home sales recently slumped to their lowest level since the recession, the median sale price in April was $450,600 — nearly 20% above prices at the same time last year. “As Americans contend with historically high inflation, the combination of rising mortgage rates, elevated home prices and tight inventory are making the pursuit of homeownership the most expensive in a generation,” government-backed mortgage company Freddie Mac said last month.
“You’d better brace yourself,” Dimon remarked. “JPMorgan is bracing ourselves, and we’re going to be very conservative with our balance sheet.”
Consumer confidence — a key metric for the direction of the United States economy — has been trending downward since the summer of 2021, according to the University of Michigan’s Survey of Consumers. Meanwhile, polls indicate that inflation and gas prices are making consumers flinch as they plan for summer spending. When Echelon Insights, for example, asked consumers whether the higher prices have induced a change of plans or cancelation of family trips, 51% answered in the affirmative.
Dimon also expressed concern about pressures induced by the Ukraine invasion — and their subsequent impacts on oil prices. He forecasted that oil may hit $150 to $175 per barrel, according to CNBC, and suggested that “we’re not taking the proper actions to protect Europe from what’s going to happen to oil in the short run.”
Treasury Secretary Janet Yellen likewise predicted last month that the world would see “enormous economic repercussions” from the Ukraine conflict. In line with other Biden administration officials, she argued that the war shows “the need for sustainable, affordable, clean, and secure energy for economic growth and security for the United States.”