Jamie Dimon, CEO of JPMorgan Chase, is one of those business leaders attending the Davos talkfest, but unlike many of those talking their own book, he tends to have valuable insights worth noting.
Source: Google Images
Dimon said “very powerful forces” will affect the US economy in 2024 and 2025, adding that he remains cautious. He cited the war in Ukraine, the conflict in Israel, and tensions in the Red Sea as well as the Federal Reserve (Fed) selling bonds, in an interview at the World Economic Forum in Davos. “It’s a mistake to think everything’s hunky-dory,” he said, adding that when the stock market is up it’s “like this little drug, we all feel it’s just great.”
It is worth remembering that Dimon warned of an economic hurricane in June 2022, before dialling that back early last year. Just a few months ago, he said investors need to be prepared for 7% interest rates. That was wrong, as he proved to be unduly pessimistic. But he might be right this time around. The S&P500 has stalled near record highs recently and the risks have mounted so far in 2024. January has seen a consolidation after 9 weeks of surging in late 2023.
No one gets all their forecasts spot on. It takes a lot of experience to sort the wheat from the chaff, and even then, credible sources often have diametrically opposite views. But Dimon’s forecasts are symptomatic of broader uncertainty over the path ahead for the US economy, and few have the insights that he possesses as head of the largest bank in the US and the world’s largest bank by market capitalisation. A range of outcomes remain on the table, though the consensus appears to be narrowing toward a slowdown of some degree, but without a recession.
In the near term, the uncertainty is manifesting itself through shifting interest rate expectations. The chances of a US rate cut in March continue to fall, slipping to 60% this week from over 70% a week ago. Strong US retail sales data last week helped lower those odds.
The US economy has consistently defied expectations and proved extremely resilient over the past year or so. A March rate cut is still being priced in but it’s probably only a matter of time before that changes.
Disclaimer: Clime Asset Management Pty Limited | AFSL 221146 | ABN 72 098 420 770. The information provided in this post is intended for general use only. The information presented does not take into account the investment objectives, financial situation and advisory needs of any particular person, nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information contained therein. Please consider the relevant disclosure document/s before investing in one of our products. Investment in securities and other financial products involves risk. An investment in a financial product may have the potential for capital growth and income but may also carry the risk that the total return on the investment may be less than the amount contributed directly by the investor. Investors risk losing some or all of their capital invested. Past performance of financial products is not a reliable indicator of future performance or returns.