These 2'storm clouds' could cut US economic sunshine short
If these two "storm clouds" hit, the US economy could quickly lose its good times.
The US economy is doing well, but JPMorgan CEO Jamie Dimon has warned that a storm may be coming.
Dimon told Bloomberg on Monday, outside of the JPMorgan Tech Starts Leadership Forum, that the country is still riding high on the trillions of dollars in government spending money that were given during the pandemic. He said that American consumers are in good shape regarding their savings, debt, and total wealth and that businesses' credit is still strong.
But Dimon pointed out a few things that could go wrong now.
He said, "Today, two things are extraordinary." "Picture them as storm clouds." We are still determining what they're going to do or if they're going to hit.
The first is the record amount of money the government has spent and the record amount of debt, along with the Federal Reserve's plan to reduce its balance sheet, Dimon said.
A wealthy banker said that problems in world politics are the "biggest storm cloud." He warned that the conflict between Russia and Ukraine affects many things, such as the price of energy, food shipping, migration, and trade and ties between countries.
Dimon said these factors could lead to inflation, especially since prices are expected to rise because of things like the switch to clean energy, increasing oil and product prices, and changes in how trade is done worldwide.
He said, "I don't think inflation will keep going down." "Perhaps not, which means rates could go up."
He also said, "At the very least, I expect markets to be volatile." He then pointed out an even more significant risk to the US economy.
He said, "The worst case is stagflation," which means high-interest rates because inflation won't disappear, and the economy will stay the same or even shrink. "Many people will be having a hard time if that happens."
Dimon told people to prepare for interest rates to rise to 7%, and he didn't rule out a sharp economic drop. He said the Fed could have a "soft landing," meaning it would crush inflation without destroying the economy. However, a slight or severe recession is still possible.
The head of JPMorgan isn't the only business leader on Wall Street who is worried about the economy. Citi CEO Jane Fraser told CNBC on Friday that she saw "cracks" in consumer demand as it dropped. These "cracks" are especially noticeable among poor Americans who are having difficulty dealing with higher prices and borrowing costs.