JPMorgan Chase CEO Jamie Dimon believes there is a higher-than-average chance that the U.S. is headed for a recession, although he doesn’t see any looming systemic problems.
Speaking Monday at the JPMorgan High Yield and Leveraged Finance Conference in Miami, the head of the largest U.S. bank by assets said markets are probably not pricing in a high enough probability that interest rates could stay higher for longer.
Dimon noted, “There are things out there that are kind of concerning,” and he disagreed with the high probability that the economy will miss a recession.
“The market is pricing in a soft landing. That could very well happen,” he told CNBC’s Leslie Picker. “But the [market’s] The chances are 70 to 80 percent. I’ll give you half, that’s all.”
The comments come as the market has actually had to reassess its expectations of monetary policy. While futures traders earlier in the year had placed a high probability on an aggressive series of rate cuts starting in March, they now expect easing to begin only in June or July, with three rate cuts now priced in – half of previous expectations.
In addition to increased interest rates, markets have had to contend with the Federal Reserve reducing its bond holdings, a process known as quantitative tightening. Although the central bank is expected to start tapering the program soon, this remains another factor in restrictive monetary policy.
“It’s always a mistake to just look at the year,” Dimon said. “All these factors that we talked about: QT, budget deficits, geopolitics, these things can have an impact over several years. But they will have an impact and they will have an impact, and in my opinion I’m a little cautious about everything.”
But Dimon said he doesn’t expect a repeat of some of the other severe downturns the U.S. economy has faced, such as the 2008 financial crisis that led to a crash on Wall Street as banks reeled from the fallout from the collapse of the subprime mortgage industry were affected.
Higher interest rates, along with a recession, could hit areas such as commercial real estate and regional banks hard, although with limited macroeconomic impact, Dimon said.
“If we have a recession, it will get worse. If we don’t have a recession, I think most people can get through it,” he said. “Part of it is just a normalization process. [Rates] were so low for so long. If interest rates go up and we have a recession, there will be real estate problems, and some banks will have a much bigger real estate problem than others.”
As for regional banks, he called problems hitting institutions like Silicon Valley Bank and New York Community Bank “idiosyncratic” and said private lending could be affected, but not at a systemic level.
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2024-02-26 19:55:38
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