When JPMorgan Chase's Chief Executive Jamie Dimon talks, financial markets listen.
He helms the world's largest U.S. and fifth-biggest bank, with $4.1 trillion of assets. Dimon, 68, has made his name steering several banks through tough times and taking advantage of opportunities as they arise.
For example, when First Republic Bank collapsed last year, Dimon and JPMorgan swept in, picking up the bank and its wealthy customers on the cheap.
Bank analysts fawn over him. “I think he’s been phenomenal,” veteran bank analyst Dick Bove told this reporter last year. “I’m a Jamie Dimon groupie. He’s done a great job everywhere he has worked.”
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What exactly makes Dimon so smart? “He has a broad vision of the financial system and the world,” Bove said. No one wants him to talk about that, but he’s thought out multiple layers, from the top down to how much ATMs cost.”
So, you might be interested to hear what Dimon says about inflation, the number one economic issue of the past few years.
What’s happening with inflation
The Consumer Price Index, or CPI, a popular inflation measure, has remained sticky above 3% since peaking at 9.1% in June 2022. The Federal Reserve’s inflation target is 2%, though it uses a different price indicator, the Personal Consumption Expenditures Price Index, or PCE, as its preferred inflation gauge.
Related: Billionaire fund manager Griffin predicts Fed rate cuts in 2024
Financial markets celebrated on Wednesday when the government announced that CPI inflation registered 3.4%, down from 3.5% in March. Stocks and bond prices rose as some investors grew more enthusiastic about the possibility that lower inflation would soon clear the way for a Fed interest-rate cut.
But central bank officials have said that rates will likely stay higher for longer. “Holding our restrictive stance for longer is prudent at this point, as we gain clarity about the path of inflation,” Cleveland Fed President Loretta Mester said Thursday.
Interest-rate futures indicate the Fed will not trim rates until September, according to the CME FedWatch Tool. Money management titan Vanguard is sticking to its view that the central bank will not move at all this year.
The most recent economic data “underscore just how far we remain from what we’d call evidence of sustainable progress in the inflation fight,” said Roger Aliaga-Diaz, Vanguard’s chief Americas economist.
Related: Housing has a problem bigger than interest rates
Jamie Dimon’s hard-nosed view on inflation
Jamie Dimon, too is concerned about inflation. “There are a lot of inflationary forces in front of us,” he told Bloomberg Television. “The underlying inflation may not go away the way people expect it to.”
He said the higher rates accompanying inflation could also be a problem. “If you have higher rates and—God forbid—stagflation, you will see stress in real estate, leveraged companies, and private credit,” Dimon said.
More Economic Analysis:
- Housing has a problem bigger than interest rates
- Analyst updates S&P 500 price target after CPI inflation surprise
- CPI inflation report resets timing of Fed interest rate cuts
Higher rates have mixed implications for you. On the downside, they mean higher payments for your mortgage, auto, credit card, and general loans. But on the upside, they mean higher income from your savings accounts and money-market funds.
“My view is whatever the world is pricing in for a soft landing, it’s probably half of that,” Dimon said, referring to the combination of lower inflation and resilient economic growth.
“I think the chances of something going wrong are higher than people think.”
Related: Veteran fund manager picks favorite stocks for 2024
The author owns shares of JPMorgan.
