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JPMorgan chief Jamie Dimon issues ominous warning about US economy
Jamie Dimon - head of the world's biggest bank JPMorgan Chase - has said that he cannot rule out a 'hard landing' for the US economy.
A 'hard landing' is when there is a marked economic slowdown following a period of rapid growth.
When asked about the worrying prospect during a CNBC interview this morning, Dimon said: 'Could we actually see one? Of course, how could anyone who reads history say there's no chance?'
America's most influential banker also said that the worst outcome for the US economy would be 'stagflation' - which is when inflation continues to go up, but unemployment is high and growth slows.
Economists consider stagflation, last seen in the US in the 1970s, to be worse than a recession. It would send stocks down, hitting 401(K)s and other retirement savings.
The billionaire banker said, in another interview last month, that he worried the US economy 'looks more like the '70s than we've seen before'.
Dimon's warning comes after an analyst who works for him at JPMorgan warned the stock market could soon become volatile - despite reaching record highs this year.
JPMorgan Chase CEO Jamie Dimon has said that he cannot rule out a 'hard landing' for the US
Since taking over in 2006, Dimon, 68, has turned JPMorgan - which has retail as well as investment arms - into the world's biggest and most powerful bank with $4 trillion of assets.
Speaking at the JPMorgan Global China Summit in Shanghai, Dimon said: 'I look at the range of outcomes and, again, the worst outcome for all of us is what you call stagflation, higher rates, recession.
'That means corporate profits will go down and we'll get through all of that. I mean, the world has survived that but I just think the odds have been higher than other people think.'
Despite this, he said the consumer is currently 'in pretty good shape' and would still be even if the economy slips into a recession.
'Unemployment has been below 4 percent now for a year and a half or two years,' he said.
'Wages are going up at the low end which I think is a very good thing. Home prices are up, stock prices are up. Even if we go into a recession, they are in pretty good shape.'
He added that consumer confidence levels are low, which he said was mostly due to inflation.
The newly released minutes from the Federal Reserve's latest meeting showed that policymakers have grown more concerned about inflation - with some members indicating there was a lack of confidence to begin cutting interest rates and easing monetary policy.
The central bank voted to hold benchmark borrowing rates steady at a 23-year-high of between 5.25 and 5.5 percent earlier this month.
Dimon told CNBC that he thinks interest rates could still go up 'a little bit.'
'I think inflation is stickier than people think. I think the odds are higher than other people think, mostly because the huge amount of fiscal monetary stimulus is still in the system, and still maybe driving some of this liquidity,' he said.
The Federal Reserve voted to hold interest rates steady at their current 23-year-high at its latest meeting earlier this month
According to the CME FedWatch Tool, around half of analysts are forecasting a 25 basis points cut by September.
The central bank has previously predicted a three quarter-percentage cut throughout 2024, but has repeatedly insisted this will only happen if there is confidence inflation is moving sustainably toward its 2 percent target.
But Dimon warned that while market expectations are 'pretty good, they're not always right.'
He added: 'The world said [inflation] was going to stay at 2 percent all that time. Then it says it will go to 6 percent, then it said it's going to go to four... It's been a hundred percent wrong almost every single time. Why do you think this time is right?'
Higher inflation and higher rates are typically bad for the stock market. They mean consumers spend less, while also making it more expensive for businesses to borrow money.
A hard landing and a recession would jolt stocks.
Dimon's comments come after JPMorgan's chief market strategist Marko Kolanovic issued a note on Monday forecasting that the S&P 500 could fall 20 percent to 4,200 by the end of the year.
Kolanovic urged investors not to turn bullish despite the Dow Jones Industrial Average breaching the 40,000-point threshold for the first time last week
The S&P 500 also marched to 5,297 on Friday, marking 23 record closes this year so far - exciting Americans with 401(K)s containing funds invested in the stock market.
JPMorgan chief market strategist Marko Kolanovic urged investors not to turn bullish despite the stock market reaching record highs this year
Kolanovic issued a note on Monday forecasting that the S&P 500 could fall 20 percent to 4,200 by the end of the year
Most Americans have at least some of their 401(K) and Individual Retirement Account invested in the Dow Jones, the S&P 500 and the Nasdaq.
They have benefited from a buoyant stock market over the past 12 months, and particularly since the start of this year.
Kolanovic reasoned that interest rates are likely to stay in restrictive territory for longer, combined with lower-income consumers showing signs of weakness and high levels of geopolitical uncertainty, according to Business Insider.
'With very high equity valuations, we do not see equities as attractive investments at the moment and we don't see a reason to change our stance,' Kolanovic said.
However he is fast becoming the exception among big bank analysts, after Morgan Stanley's Mike Wilson - the only other notable bear left on Wall Street - turned bullish earlier this week.
Wilson, who is known as one of Wall Street's most prominent pessimists, said he now sees the S&P 500 rising 2 percent by June 2025 - which is a major turnaround from his previous forecast that the index would tumble 15 percent by the end of the year.