JP Morgan Chase CEO Identifies Global Risks
Jamie Dimon is the CEO of JPMorgan Chase, the largest bank in the US. They have a balance sheet total of $2.87 trillion.1 He recently sent his annual letter to shareholders. And Wall Street paid close attention. Dimon wrote, ” America and the rest of the world are facing the confluence of three important and conflicting forces.” He said that these factors could affect the global economy for decades.
The first force is a U.S. economy rebounding from the Covid pandemic. The second is high inflation that will result in rising interest rates. And the third force is Russia’s invasion of Ukraine.
Recovery and Inflation
Dimon credited the Fed with creating a strong recovery. He also recognized their role in creating record inflation. The CEO said, “The Federal Reserve and the government did the right thing by taking bold dramatic actions following the misfortune unleashed by the pandemic. In hindsight, it worked. But also in hindsight, the medicine was probably too much and lasted too long.”
He stated that the stronger the recovery, the higher the rates that follow. Dimon believes that rates could become significantly higher than the markets expect. The high increases are needed. But, they will cause drastic market volatility.2
Impact of the War in Ukraine
Russia’s invasion has changed the world. It caused market turmoil, realigned alliances, and restructured global trade patterns. “The war in Ukraine and the sanctions on Russia, at a minimum, will slow the global economy — and it could easily get worse.” Dimon said. 3
JP Morgan predicts the invasion will greatly reduce Russia’s GDP. It will cut the European Community’s growth in half. US growth will slow as well. But those predictions could get worse the longer the conflict lingers.
In addition, supply chains have become unpredictable. Global energy supplies have become easily disrupted. Dimon now believes that trade and supply chains that affect national security need to be restructured. Vital products and raw materials must be made in the US or by US allies. This transition would be chaotic. Decades of globalism would unravel. The overall effect will be more economic uncertainty, threats to the dollar and higher inflation.
Dimon summarized his view of these challenges. “They present completely different circumstances than what we’ve experienced in the past. Their confluence may dramatically increase the risks ahead,” he wrote. “While it is possible, and hopeful, that all of these events will have peaceful resolutions, we should prepare for the potential negative outcomes.”4
When it comes time prepare for negative outcomes, it good to remember what JP Morgan himself said. “Money is gold, and nothing else.”5 If you want to protect your investments, contact AHG about setting up a Gold IRA today.