JPMorgan Chase (JPM) CEO Jamie Dimon once again cited global instability as his chief concern and named it as one of the reasons why inflation may not yet be under control, saying that “geopolitics is getting worse."
“My caution is all geopolitics, which may determine the state of the economy,” Dimon said in an interview with CNBC TV18 while attending a JPMorgan conference in Mumbai, India.
Geopolitics are "getting worse, they are not getting better," he added, pointing to recent attacks by Yemen’s Houthi rebels in the Red Sea. "There's chance for accidents in the energy supply chain. God knows if other countries get involved. You have a lot of war taking place right now."
The comments marked the third time in the last week that the boss of the biggest US bank offered new skepticism about the economy's long-term path despite a new rate cut from the Federal Reserve designed to cushion a cooling labor market as inflation falls back.
Flames and smoke rise from the Greek-flagged oil tanker Sounion on the Red Sea in August. Yemen's Houthis said they attacked the Sounion in the Red Sea. (REUTERS/File Photo) ·(Reuters / Reuters)
On Friday, Dimon poured more cold water on the notion that the US central bank is likely to achieve a soft landing for the economy.
“I wouldn’t count my eggs” on the outcome, he said at the Atlantic Festival in Washington, D.C.
Last Tuesday, when asked at a Georgetown University event what concerned him from a financial markets perspective, he said that "the most important thing that dwarfs all other things, that's really important, far more important today than [its] been probably since 1945, is this war in Ukraine, what's going on in Israel [and] in the Middle East, America's relations with China, and the attack fundamentally on the rule of law that was set up after World War II."
Dimon has been warning for some time that the US economy could be more vulnerable than some market observers think, having voiced concerns about a potential stagflationary environment where inflation remains elevated and some rates surge to 7% as the labor market weakens.
"I am not sure if the world is prepared for 7%," he said at an event in India a year ago.
As recently as August, he said he was still "a little bit skeptical" that the inflation rate would fall back to the Fed’s 2% target. He also said then that the odds of a recession still happening were better than the chance of no recession.
Last Tuesday, Dimon acknowledged the need for the Fed to begin lowering interest rates but played down the importance of the central bank’s first move, calling it “a minor thing.”
Jamie Dimon speaks on stage during "The State of the Global Economy" panel for The Atlantic Festival 2024 last Friday. (Tasos Katopodis/Getty Images for The Atlantic) ·(Tasos Katopodis via Getty Images)
The coming rate cuts, however, will have an effect on the bank.
That was made clear earlier this month when JPMorgan COO Daniel Pinto warned that the consensus view among analysts for the bank to earn net interest income of $91.5 billion in 2025 was "not very reasonable" due partly to the effect of falling rates.
While admitting the bank’s financial projections for next year weren't complete, Pinto said JPMorgan was guiding for expenses to run higher in light of inflation and some other investments, while its biggest profit driver, net interest income, looked to be lower due to falling rates.
Net interest income measures the difference between what banks earn on their assets (loans and securities) and what they pay out on their deposits.
JPMorgan's stock fell the most intraday since 2020 following Pinto's comments.
On Tuesday in India, Dimon argued that he’s an optimist in the long term, but in the “short run, I’m a little more skeptical than other people that everything is going to be great.”
He warned about inflation's longer-term path even beyond the eruption of more conflict along with existing wars in Ukraine and the Middle East.
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He cited shifting demographics, world trade, and remilitarization, as well as the green economy transition and medium-term implications of artificial intelligence as potential contributors.
He also offered some skepticism about the lagging effects of US economic data releases that have become so pivotal for traders' expectations of the Fed's next move on interest rates.
“Underneath the rate, there's a real economy. No one knows what that real economy is going to do next year. No one,” he said Tuesday.
“Hopefully, we'll continue to exhibit growth with inflation coming down. I'm a little more skeptical about that, but it is happening,” he admitted.
“Markets are pricing things like they're going to be great. Put me on the cautious side of that one,” he added.
As for politics, Dimon said he doesn't endorse either political candidate currently running for president, and he doesn't "expect to be the Treasury secretary."
David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto, and other areas in finance.
