By David Goldman, NCS
(NCS) — 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 financial system right into a recession and redefine the world 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 financial system going into 2026. The financial system began the 12 months with the wind at its again: Tax cuts and a deregulatory, professional-enterprise agenda from President Donald Trump and congressional Republicans’ One Big Beautiful Bill will add $300 billion to the US financial system this 12 months, 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 mentioned the US financial 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 beginning 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 mentioned in the 48-web page letter.
The war with Iran will increase the threat for important and protracted oil and commodity value shocks, Dimon warned. It could additionally alter the world provide chain, related to what occurred in the wake of the pandemic. And similar to in 2021 via 2023, we could be in for an additional spherical of sticky inflation and surging rates of interest from the Federal Reserve and different world central banks to counter it.
Dimon referred to as steadily rising inflation and rates of interest “the skunk at the party” that could trigger shares to fall this 12 months.
Dimon additionally warned that although the financial system stays robust, it depends on progress and inventory market features to maintain fueling it. If these flip south, a few of these dangers current in the financial system could grow to be an issue.
For instance, enormously excessive authorities debt hundreds are manageable so long as GDP stays sturdy 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 partially due to world 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 mentioned. “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 non-public credit score market.
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