JPMorgan Chase & Co. CEO Jamie Dimon sees a storm on the horizon for the U.S. economy, but he’s not sure if it’ll be a superstorm or a minor one.
Dimon turned to weather metaphors when asked about the challenges facing the U.S. Federal Reserve to tame inflation on Wednesday at the Bernstein Strategic Decisions Conference.
The economy remains “sunny” at the moment with fiscal stimulation from the U.S. government “still in the pocketbooks of consumers who are spending it,” according to a transcript of the event posted by FactSet.
Consumer spending remains bullish, with plentiful jobs and wages going up, but inflation continues to threaten prosperity.
“Everyone thinks the Fed can handle this,” Dimon said. “That hurricane is right out there down the road coming our way. We just don’t know if it’s a minor one or Superstorm Sandy, or Andrew or something like that. [Y]ou better brace yourself.”
He said he’s positioned JPMorgan JPM, -1.13% to focus on the strength of its balance sheet to withstand any impact.
Dimon pointed his finger toward the war in Ukraine causing hikes in oil prices, fiscally-induced growth and the challenge of hiking interest rates without causing a recession as some of his major concerns.
“Wars go bad — they go south,” Dimon said. “They have unintended consequences and this happens to be within the commodity markets of the world wheat, oil, gas and stuff like that which in my view will continue. We’re not taking the proper actions to protect Europe from what’s going to happen in oil in the short run and we’re not taking the proper actions to protect you all watch cap the oil in the next five years, which means it almost has to go up the price.”
The banking industry remains in solid shape to weather any storm, he said.
Asked for his reaction to Dimon’s comments, St. Louis Fed President James Bullard said that European economy was more at risk from the Ukraine war than the U.S. economy was.
He said the quantitative tightening was being phased in so it was not a big a shock as it otherwise would be.
“We’ll keep a close eye on how quantitative tightening is proceeding,” he said.
Also Read: Fed to begin quantitative tightening: What that means for financial markets.
In the face of jitters around a recession and higher interest rates, bank stocks have weakened in 2022 after a strong year in 2021.
The Financial Select SPRD ETF XLF, -1.06% has lost 10.6% so far in 2022, compared with a loss of 13.8% by the S&P 500 SPX, -0.24%. Shares of JPMorgan Chase were off by 17.7% in 2022 as of Wednesday’s trades.
MarketWatch economics editor Greg Robb contributed to this report.