<mediadc-video-embed data-state="{"cms.site.owner":{"_ref":"00000161-3486-d333-a9e9-76c6fbf30000","_type":"00000161-3461-dd66-ab67-fd6b93390000"},"cms.content.publishDate":1654112897969,"cms.content.publishUser":{"_ref":"00000168-ed7d-d9d9-a9ec-ff7daffb0002","_type":"00000161-3461-dd66-ab67-fd6b933a0007"},"cms.content.updateDate":1654112897969,"cms.content.updateUser":{"_ref":"00000168-ed7d-d9d9-a9ec-ff7daffb0002","_type":"00000161-3461-dd66-ab67-fd6b933a0007"},"rawHtml":"
var _bp = _bp||[]; _bp.push({ "div": "Brid_54112793", "obj": {"id":"27789","width":"16","height":"9","video":"1020805"} }); ","_id":"00000181-20cf-de8b-afe9-f2efb9c40000","_type":"2f5a8339-a89a-3738-9cd2-3ddf0c8da574"}”>Video EmbedJPMorgan Chase CEO Jamie Dimon is warning investors to be prepared for an economic “hurricane.”
Dimon, a billionaire who is regarded as one of the foremost voices in finance, said the Federal Reserve’s plan to continue hiking interest rates, combined with uncertainty surrounding the war in Ukraine, is causing his firm to batten down the hatches.
“You know, I said there’s storm clouds but I’m going to change it … it’s a hurricane,” Dimon said at a Wednesday conference, according to CNBC. The economic maelstrom could be “a minor one or Superstorm Sandy,” he added.
Dimon went on to say that JPMorgan is going to be very conservative with its balance sheet and that while some investors might think it’s “sunny” right now and the Fed can handle quantitative tightening while averting a recession, the hurricane is “down the road, coming our way.”
FED BEHIND THE CURVE IN RAISING RATES TO CURB INFLATION, JAMIE DIMON SAYS
“We’ve never had QT like this, so you’re looking at something you could be writing history books on for 50 years,” Dimon said Wednesday.
The Federal Reserve has begun jacking up interest rates and tightening its monetary policy to combat inflation. The central bank increased rates by a quarter percentage point in March and then took the even more aggressive step of hiking rates by a half percentage point in May.
More half-percentage-point rate hikes are expected in the coming months as consumer prices appear to be cresting at 8.3% in the 12 months ending in April.
The Fed action is intended to slow spending and lessen upward price pressures. That raises concerns for economists who fear that too much tightening too quickly could tip the economy into a recession.
A recession is defined by the National Bureau of Economic Research, a private academic group, as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.” Some see it as two consecutive quarters of negative gross domestic product growth.
While the first quarter of this year saw a decline in GDP, more forecasters expect this quarter to see positive GDP growth, albeit slower growth than was forecast just months ago. The Congressional Budget Office recently released an economic outlook report that indicated U.S. real GDP will increase by 3.1% this year.
Goldman Sachs assigns a 35% chance of a recession in the next two years, while Wells Fargo’s economic model projects a 30% chance of a recession in the next six months alone.
The stock market has also been in retreat since the start of the year as investors eye the multiple rounds of rate hikes. The markets have been battered by the war in Ukraine, which has caused commodity and energy prices to skyrocket, further fueling inflation and complicating the Fed’s job.
Late last month, the S&P 500 briefly entered bear market territory, a term that means an index has dropped by at least 20% from a recent high. While the index has recovered some over the past week, the S&P 500 has fallen more than 14% since the start of the year, its most recent peak.
Dimon on Wednesday warned that given the volatility surrounding the war in Ukraine, oil prices could end up hitting $150 or $175 a barrel.
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“Wars go bad, [they] go South in unintended consequences,” he said. “We’re not taking the proper actions to protect Europe from what’s going to happen to oil in the short run.”
The average price for a gallon of gas is now a whopping $4.67 nationwide, according to AAA. That is up about 50 cents from a month ago and $1.62 more than this time last year.
