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Earlier in the week, Jamie Dimon got our attention by calling this perhaps “the most dangerous time the world has seen in decades.”
And that may be true, from a geopolitical perspective. Wars are now raging in both Ukraine and Israel, with broader implications. Dimon also pointed to the risks of the Federal Reserve’s quantitative tightening program at a time when inflation is persisting.
As my colleague Brian Sozzi wrote this week, when one of the most powerful CEOs in the world makes a dramatic comment like that, you take notice.
But in markets, it’s always a good idea to think about how someone may be talking his book.
“For Jamie Dimon — for a bank that has strongly outperformed its peers, it’s a matter really of trying to lower expectations,” Ken Leon, a veteran bank analyst at CFRA, told Yahoo Finance Live. “That’s always his mission, to lower the bar, because it’s the one bank every quarter that outperforms and delivers across all the lines of business.” (JPM happens to be one of Leon’s top picks).
And if you tune Dimon out, there are quite a few reassuring signals.
Take Tuesday’s retail sales report, which came in double economists’ estimates. While it could put pressure on the Fed to raise rates once again, central bank officials have presented a remarkably consistent message over the past couple of weeks: They are willing to be patient, and higher Treasury yields are helping tighten financial conditions without them having to further raise rates at this time.
Spurred by that retail sales data, the Atlanta Fed’s GDPNow forecast now stands at 5.4% annualized growth for the third quarter. The S&P 500 has bounced back by more than 3% since early October. Early earnings from the big banks and the likes of Johnson & Johnson have beat estimates.
Bank of America’s weekly fund flows data showed an 11th straight week of inflows into equities, with buyers favoring cyclicals over defensives — implying optimism about economic growth.
Maybe investors should pay attention to what Dimon said after his warning: “While we hope for the best, we prepare the Firm for a broad range of outcomes so we can consistently deliver for clients no matter the environment.”
In other words, while there appear to be positive signs for the economy and markets, it never hurts to be prepared for anything.
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