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It seems JPMorgan CEO Jamie Dimon can\u2019t see a way ahead for the U.S. economy that doesn\u2019t end in stagflation<\/a>.<\/p>\n It\u2019s a warning Dimon has issued before, previously saying he fears America is headed for a repeat of the 1970s<\/a> when everything \u201cfelt great\u201d and then quickly about-turned to a period of high unemployment and inflation paired with low demand, also known as \u201cstagflation.\u201d<\/a><\/p>\n Appearing at AllianceBernstein\u2019s Strategic Decisions conference on Wednesday, Dimon said he simply can\u2019t see how the past five years of massive fiscal and monetary stimulus could result in anything other than this scenario. <\/p>\n Asked about the health of the banking sector more widely, Dimon said he and the JPMorgan team are \u201cscenario planning\u201d for both a hard and soft landing. The general consensus is the Federal Reserve will manage to engineer a soft landing<\/a>, an economic slowdown that won\u2019t end in a recession.<\/p>\n \u201cIf we have a soft landing and rates stay where they are, come down a little bit\u2014which is what the world expects, everyone\u2019s fine,\u201d he said. <\/p>\n But the Wall Street veteran has long refused to be lulled into any sense of security<\/a>, so he countered: \u201cIf you have a harder landing with stagflation you\u2019re going to see a lot of stress and strain in the system from banks to leveraged companies to real estate to a whole bunch of stuff.\u201d<\/p>\n \u201cIf things get worse it\u2019s going to filter right through all those things and my view is the world\u2019s just not ready for that,\u201d he said.<\/p>\n Indeed, the general sentiment on Wall Street is that 2024 is in for another relatively smooth year. At a Goldman Sachs<\/a> investment event attended by Fortune<\/em> last week, a room of investors were asked where they were bullish, bearish, or neutral on the outlook ahead.<\/p>\n More than half\u201453%\u2014said they were positive on the year ahead, while 39% were neutral. Less than 10% were bearish.<\/p>\n Dimon, who was paid $36 million for his work leading America\u2019s biggest bank in 2023, isn\u2019t so convinced<\/a>. <\/p>\n \u201cA lot of you in this audience have never seen rates at 6% on a 10-year bond,\u201d the 68-year-old Wall Street veteran added. \u201cI don\u2019t know why you think it\u2019s not possible. It is possible. I, for one, think the odds are much higher than other people think.\u201d<\/p>\n It has indeed been more than two decades since bond yields dipped above 6%, but prior to the late 1990s<\/a> this was practically normal. <\/p>\n The CEO who recently signaled his intention to leave the top job at JPMorgan within the next five years said he is, more widely, seeing banks preparing for a range of outcomes such as the base rate staying higher. <\/p>\n The outlook on rates is rapidly changing from the optimism Wall Street was basking in earlier this year. In May, Reuters surveyed more than 100 economists<\/a> and found two-thirds now expect the first rate cut to come in September, whereas a month prior only half believed this would be the first cut<\/a>. Likewise, the May survey found 11 economists forecast a cut in July and none said June\u2014a month prior, those figures stood at 26 and four, respectively.<\/p>\n Dimon, who has led JPMorgan since 2006, has made no effort to hide his concerns <\/a>over how the U.S. will repay its debts. <\/p>\n While economists argue, and Dimon may agree, that spending over the past five years has been necessary, the fact remains that America\u2019s debt-to-GDP ratio currently stands at around 122%, per the St Louis Fed<\/a>.<\/p>\n And it\u2019s because of this spending that Dimon is so convinced a nasty \u201csurprise,\u201d stagflation, may come to pass.<\/p>\n \u201cI\u2019m not saying it\u2019s going to happen, I just give the odds much higher than other people,\u201d Dimon added. \u201cI look at the amount of fiscal and monetary stimulus that has taken place over the last five years\u2014it has been so extraordinary, how can you tell me it won\u2019t lead to stagflation?\u201d<\/p>\n \u201cIt might not,\u201d he said. \u201cBut I, for one, am quite prepared for it.\u201d<\/p>\n<\/div>\n\n\u2018Extraordinary spending\u2019<\/h2>\n
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