JPMorgan’s first-quarter profits fell 42 percent as the bank stashed away funds to brace for inflation and boost reserves in case of a recession. CEO Jamie Dimon is warning that “powerful forces” threaten the U.S. economy.
More disruptions in financial markets are coming, Dimon warned, pointing to interest rate hikes by the U.S. Federal Reserve, supply chain issues, inflation, commodity price volatility, and the war in Ukraine.
“I cannot foresee any scenario at all where you’re not going to have a lot of volatility in markets going forward,” Dimon told analysts during JPMorgan’s quarterly conference call. “There’s almost no chance you won’t have volatile markets. That could be good or bad for trading but there’s almost no chance it won’t happen and I think people should be prepared for that.”
Dimon said the economy is strong and growing, credit card spending is seeing double-digit growth, delinquencies are low and household and consumer balance sheets are healthy. A year ago, the bank freed up $5.2 billion set aside in reserves for potential loan losses during the early months of the pandemic.
JPMorgan surprised Wall Street when it put $900 million in new fund reserves to prepare for economic turmoil, Wall Street Journal reported.
Dimon said the risk of recession is slight but growing after Russia invaded Ukraine and U.S. inflation reached its highest level in 40 years.
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“Those are very powerful forces, and those things are going to collide at one point,” Dimon said. “No one knows what’s going to turn out.”
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In times of market uncertainty, CNBC “Mad Money” host Jim Cramer told investors to be prepared with lots of cash. “I think you can do very well right now in a balanced portfolio that also has a lot of cash on the sidelines. You want to be ready for the moment when things actually get better. It’s just that there’s so much uncertainty, you got to be a little more cautious than we might like.”
Consumer prices rose 8.5 percent in March compared with a year earlier, their highest levels since 1981, according to the Labor Department’s consumer price index (CPI) report released on April 12. Stocks fell in response.
Photo: JPMorgan Chase headquarters in New York, May 11, 2012 (AP Photo/Mark Lennihan, File)