JPMorgan Chase CEO Jamie Dimon predicts the chance of a recession is in the neighborhood of 10-to-30 percent, but the boss of the largest U.S. bank said there are “storm clouds” and something worse could be coming.
The U.S. economy is strong, Dimon told wealthy clients in an Aug. 9 note. Consumers’ balance sheets and businesses are in good shape, but “you have to think differently” when forecasting. “What is out there? There are storm clouds. Rates, QT, oil, Ukraine, war, China,” he added.
“If I had to put odds: soft landing 10 percent. Harder landing, mild recession, 20 percent, 30 percent. Harder recession, 20 percent, 30 percent. And maybe something worse at 20 percent to 30 percent.”
While there is no standard definition for a depression, it is commonly defined as a more severe version of a recession, according to the Federal Reserve Bank of San Francisco: “There are repeated periods during which real GDP falls, the most dramatic instance being the early 1930s. Such periods are called recessions if they are mild and depressions if they are more severe.”
Consumers are losing confidence in the economy, Dimon said, “because of inflation, because of partisan politics, and a lot of leftover anger from covid-19.”
“I wish we had the spirit that we were all here to work together, but it seems we just got nastier somehow,” Dimon said.
Dimon predicted inflation will not go down the way the Fed wants it to, and the goal of bringing it from 8 percent to 4 percent by the end of 2022 is “highly unlikely.”
It would be a mistake to rely on any single-point forecast when trying to predict what will happen with the U.S. economy, Dimon said, but he has a lot to be pessimistic about.
While the Federal Reserve wants to slow the economy down further and economists predict a global recession, many large companies are showing corporate optimism and strong numbers in their quarterly reports as they discuss their outlooks with Wall Street, New York Times reported.
Facebook/Meta reported disappointing numbers, and CEO Mark Zuckerberg is pessimistic. Other tech giants such as Alphabet, Amazon, Apple and Microsoft all released results that were enough to persuade investors that their businesses were not falling off a cliff.
However, some of these same companies’ actions tell another story. Apple and Microsoft announced plans to cut workers or slow hiring, as did Meta. Retailers Walmart and Target reduced their profit forecasts.
Dimon’s prediction, while vague, is more pessimistic than most, but not all, other executives, according to Fortune.
BlackRock CEO Larry Fink said a recession was a risk but described the economic headwinds pressuring markets as “business as usual” for long-term investors, saying they should keep calm and carry on.
Deutsche Bank CEO Christian Sewing put the odds of a recession at 50/50. Harvard economist Jason Furman, a former Obama White House economic advisor, said it’s less likely than that.
Oppenheimer & Co. chief investment strategist John Stoltzfus—the most optimistic on CNBC’s Market Strategist Survey—said the market will avoid a recession and rise 40 percent from where it is today by the end of 2022.
Wall Street strategists David Roche said this is a moment to realize that “things do turn around.”
However, Bitcoin bull Mike Novogratz told MarketWatch that the U.S. is heading into a “really fast recession” and “the economy is going to collapse.”
Dimon warned in June that an economic hurricane was “coming our way” and advised investors to brace for it.
A lot worse than a recession, a depression accompanies a significant drop in GDP and usually lasts for many years. The Great Depression lasted for a decade in the U.S. with unemployment rates reaching 25 percent and wages falling by 42 percent.