Jamie Dimon is warning that the US-Israeli war with Iran could lead to one other spherical of persistent inflation and better rates of interest that could sink the US economic system right into a recession and redefine the international economic order.
“Then again, it may not,” Dimon hedged.
In his annual letter to shareholders, launched Monday, the JPMorgan CEO painted a principally rosy image of the US economic system going into 2026. The economic system began the yr with the wind at its again: Tax cuts and a deregulatory, pro-business agenda from President Donald Trump and congressional Republicans’ One Big Beautiful Bill will add $300 billion to the US economic system this yr, boosting America’s gross home product by about 1%, he predicted. And large spending on AI and associated applied sciences will drive US productiveness.
Dimon stated the US economic system is on sturdier floor now than in years previous, which could insulate America from a few of the economic hassle brewing round the world, at the start from the war. But that doesn’t negate the risk of a recession.
“While the economy may be less fragile than in the past, this alone does not mean there is no ‘tipping point’ — it just may mean it could take more straws on the camel’s back to get there,” Dimon stated in the 48-page letter.
The war with Iran will increase the danger for important and protracted oil and commodity value shocks, Dimon warned. It could additionally alter the international provide chain, comparable to what occurred in the wake of the pandemic. And similar to in 2021 by way of 2023, we could be in for an additional spherical of sticky inflation and surging rates of interest from the Federal Reserve and different international central banks to counter it.
Dimon known as progressively rising inflation and rates of interest “the skunk at the party” that could trigger shares to fall this yr.
Dimon additionally warned that although the economic system stays robust, it depends on progress and inventory market beneficial properties to maintain fueling it. If these flip south, a few of these dangers current in the economic system could grow to be an issue.
For instance, enormously excessive authorities debt hundreds are manageable so long as GDP stays strong and rates of interest keep comparatively low. But that’s a giant “if,” and the debt could balloon right into a disaster down the highway if it’s not correctly managed, Dimon warned.
Stock costs are excessive partly due to international turmoil. US equities stay a secure haven asset, however Dimon famous that didn’t stop earlier recessions and bear markets. Sometimes unhealthy markets spook traders, making a type of suggestions loop.
“Human nature has not changed — sentiment and confidence can change rapidly and drive the markets,” Dimon stated. “Falling asset prices at one point can change sentiment rapidly and cause a flight to cash.”
Dimon additionally warned about souring US-China relations, Trump’s commerce coverage and rising issues in the personal credit score market.