Dimon’s comments come a day after US President Joe Biden met Federal Reserve Chairman Jerome Powell to discuss inflation, which is hovering at forty-year highs.
“You know, I said there are storm clouds but I’m going to change it…it’s a hurricane,” Dimon said Wednesday at a financial conference in New York. While conditions seem “fine” at the moment, nobody knows if the hurricane is “a minor one or Superstorm Sandy,” he added.
“You’d better brace yourself,” Dimon told the roomful of analysts and investors. “JPMorgan is bracing ourselves and we’re going to be very conservative with our balance sheet.”
The economic hurricane is right out there, says Dimon
While stocks bounced from a precipitous decline in recent weeks on optimism that inflation may be easing, Dimon seemed to dash hopes that the bottom is in.
“Right now, it’s kind of sunny, things are doing fine, everyone thinks the Fed can handle this,” Dimon said. “That hurricane is right out there, down the road, coming our way.”
There are two main factors that has Dimon worried: First, the Federal Reserve has signaled it will reverse its emergency bond-buying programs and shrink its balance sheet. The so-called quantitative tightening, or QT, is scheduled to begin this month and will ramp up to $95 billion a month in reduced bond holdings.
“We’ve never had QT like this, so you’re looking at something you could be writing history books on for 50 years,” Dimon said. Several aspects of quantitative easing programs “backfired,” including negative rates, which he called a “huge mistake.”
The other large factor worrying Dimon is the Ukraine war and its impact on commodities, including food and fuel. Oil “almost has to go up in price” because of disruptions caused by the worst European conflict since World War II, potentially hitting $150 or $175 a barrel, Dimon said.
“Wars go bad, [they] go south in unintended consequences,” Dimon said. “We’re not taking the proper actions to protect Europe from what’s going to happen to oil in the short run.”
Dimon is “proud” of his Greek roots
Dimon has been the chairman and chief executive officer of JPMorgan Chase—the largest of the big four American banks—since 2005. He was previously on the board of directors of the Federal Reserve Bank of New York.
“I am very proud to be Greek and I always think that if my grandparents were here, three of whom immigrated from the country in difficult times, they would be surprised today for two reasons: one is that I am with the Prime Minister and the second is that I am the President and CEO of JPMorgan Chase,” he said. “So that makes me proud for many different reasons.”