JPMorgan chief executive Jamie Dimon is warning against becoming complacent as he believes it is within the realm of possibility for the US economy to witness a severe downturn next year.
In a new interview with the Wall Street Journal, Dimon says the US economy is doing well this year with strong consumer spending, low unemployment and the stock market trading close to record highs.
But the JPMorgan CEO warns that the economy’s strength is mostly driven by fiscal spending, which he says will eventually lead to a resurgence of inflation. He also names five headwinds that could trigger a hard landing in 2025.
“I’m trying to say what are the range of possible outcomes? Last year and this year, I would put out the same issues: huge amount of fiscal deficit, huge amount of QE (quantitative easing). A lot of things in the future are inflationary: the green economy, the re-militarization of the world, obviously the deficits which basically aren’t to go away as far as the eye can see and geopolitics.
All that puts me on the side of caution that things may not go as well as people expect, but the odds of a soft landing, the market kind of prices in 70%. I think it’s half of that.
As a business person, I try to be prepared for all of that, just a little cautious. It looks a little bit more like the [1970s] to me. And I point out to a lot of people, things looked pretty rosy in 1972. They were not rosy in 1973.
So don’t get lulled into a false sense of security because the today looks okay that tomorrow’s going to be okay. So just trying to separate the two.”
In 1973, the US economy entered a period of recession where it witnessed high inflation and high unemployment at the same time. The economy did not show signs of recovery until 1975.
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