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Newsweek
20-05-2025
- Business
- Newsweek
JPMorgan CEO Issues Inflation Warning
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. JPMorgan Chase CEO Jamie Dimon has warned that inflation risks remain elevated despite the temporary reduction in tariffs announced by the U.S. and China last week, and that markets have exhibited an "extraordinary amount of complacency" regarding the long-term impacts of the trade dispute. Speaking at the financial institution's investor day on Monday, Dimon said: "I don't think we can predict the outcome and I think the chance of inflation going up and stagflation is a little higher than other people think," he added. Why It Matters While inflation has eased, according to recent official data, consumer surveys reveal lingering anxieties about the prospect of rising prices through 2025—anxieties that, as Dimon noted, the tariff pause has not yet dispelled. Experts told Newsweek previously that despite the 90-day pause—intended as a window for more comprehensive negotiations between the U.S. and China—the reduced rates still remain high compared to previous levels, and there still exists a strong possibility of the trade war reigniting. What To Know JPMorgan was among the institutions to lower its forecasts of a recession in 2025 following the announcement of a significant but temporary reduction in the tariffs between the U.S. and China on May 12. The firm lowered the probability to 50 percent from 60 percent previously. CEO of JPMorgan Chase, Jamie Dimon visits "Mornings With Maria" with Maria Bartiromo at Fox Business Network Studios on April 09, 2025 in New York City. CEO of JPMorgan Chase, Jamie Dimon visits "Mornings With Maria" with Maria Bartiromo at Fox Business Network Studios on April 09, 2025 in New York markets rallied following the announcement that tariff rates on Chinese imports would be reduced to 30 percent from 145 percent, and that China's rates on American goods would drop to 10 percent from 125. America's benchmark indexes—The S&P 500, Dow Jones Industrial Average and Nasdaq Composite—are now all trading above their levels before Donald Trump's "Liberation Day" speech on April 2. However, Dimon said that much of this investor optimism stemmed from the fact that the effects of the remaining tariffs had not yet materialized. "People feel pretty good because you haven't seen an effect of tariffs," he said on Monday. "The market came down 10 percent, it's back up 10 percent—I think that's an extraordinary amount of complacency." What Is Stagflation? In addition to inflation, Dimon warned that the risks of "stagflation" were more elevated than many believed. The term denotes stagnant economic growth, alongside high unemployment and persistent inflation. The three do not typically increase simultaneously, and this creates a significant challenge for central banks given the given the inverse effects of the remedies used to address each issue. Raising or maintaining interest rates at high levels is normally used to combat inflation, but doing so can limit economic growth. Stimulating economic growth and employment by lowering borrowing costs, meanwhile, can contribute to inflation. What People Are Saying Michael Feroli, chief U.S. economist at JPMorgan, wrote on Monday: "The administration's recent dialing down of some of the more draconian tariffs placed on China should reduce the risk that the U.S. economy slips into recession this year. We believe recession risks are still elevated but are now below 50 percent." Federal Reserve Chair Jerome Powell, during a press conference before the U.S-China-tariff pause, said: "If the large increases in tariffs that have been announced are sustained, they are likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment. The effects on inflation could be short-lived—reflecting a one-time shift in the price level. It is also possible that the inflationary effects could instead be more persistent. Avoiding that outcome will depend on the size of the tariff effects, on how long it takes for them to pass through fully into prices, and, ultimately, on keeping longer-term inflation expectations well anchored." Treasury Secretary Scott Bessent, in an interview with CNN on Sunday, said that tariff rates could return to the "reciprocal" levels announced by the president on April 2 if countries "do not negotiate in good faith." Bessent added that there were 18 "important" trading partners the U.S. was focused on striking deals with. What Happens Next? The temporary reduction in tariffs between the U.S. and China is due to last until mid-August, while the 90-day pause on other nations' "reciprocal" tariffs, announced by Trump on April 9, will extend into July.
Forbes
10-04-2025
- Business
- Forbes
Recessions & Equities - What The Supposed Experts Aren't Telling You
NEW YORK, NEW YORK - APRIL 09: CEO of JPMorgan Chase, Jamie Dimon (L) speaks with Maria Bartiromo ... More (R) on "Mornings With Maria" at Fox Business Network Studios on April 09, 2025 in New York City. (Photo by) 'Most CEOs I talk to would say we are probably in a recession right now,' Blackrock CEO Larry Fink explained at an event for the Economic Club of New York on April 7. 'I think probably [a recession is] The JPMorgan Chase CEO added, 'Markets aren't always right, but sometimes they are right. I think this time they are right because they're just pricing uncertainty [at] the macro level and uncertainty [at] the micro level, at the actual company level, and then how it affects consumer sentiment. It's hard to tell.' Goldman Sachs on April 6 raised its probability of a U.S. economic contraction in the next 12 months to 45%, up from 35%, as its economists cited policy uncertainty, foreign consumer boycotts and tighter financial conditions. Goldman's odds surged to 65% on the morning of April 9, but the investment bank quickly revised that estimate back down to 45% after President Trump shocked the markets with a post on Truth Social: Based on the fact that more than 75 Countries have called Representatives of the United States, including the Departments of Commerce, Treasury, and the USTR, to negotiate a solution to the subjects being discussed relative to Trade, Trade Barriers, Tariffs, Currency Manipulation, and Non Monetary Tariffs, and that these Countries have not, at my strong suggestion, retaliated in any way, shape, or form against the United States, I have authorized a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately. Needless to say, economic forecasting is fraught with peril! Given that the tariff battle is far from over and President Trump also amped the levies on China on April 9, the odds of recession remain elevated. As a result, I continue to expect a steady stream of headlines warning that a slowdown in economic activity will drag down corporate profits and, in turn, stock prices. That seems logical in theory, but we think it important to investigate what has happened in practice. There have 'only' been 15 economic recessions in the United States since 1927, which is how far back freely available equity return data exists. While the 16th may be imminent, the start and end dates are never known in advance. And contrary to current media proclamations, stocks have suffered only modest pullbacks, on average, during contractions and decent gains, again on average, in the year leading up to them. Equity Returns Before & During Recessions More importantly, investors in Value, Dividend, Large and Small Stocks have enjoyed fantastic average returns following the end of an economic contraction. Alas, they don't ring a bell to mark the conclusion. As a result, those who somehow managed to avoid historically modest average losses during a recession likely sat on the sidelines waiting for an all-clear signal and missing a large part of the massive rallies. Equity Returns After Economic Recessions Irrespective of the giant near-3000-point rebound in the Dow Jones Industrial Average on April 9, I continue to think trying to outguess the economy is hardly a recipe for success. Yes, it would be nice to be find a reliable indicator that tells an investor when to get in and out of stocks, but I learned long ago that the only problem with market timing is getting the timing right. Russell Investments has done its own study of recessions and stocks going back further in time than mine. They have found: 'The 15 recessions with negative returns lasted 17 months on average, with an annualized cumulative return of -14.8% and average GDP decline of -4.6%. The Great Depression from August 1929 through March 1933, a duration of 43 months, had a total U.S. stock return of -73.6% and was the worst economic downturn on record.' Of course, they have also learned: 'There have been 16 recessions which had positive stock market returns—as measured from the start to the end of each recession. These positive-market recessions lasted on average 16 months, with stock returns ranging from 38.1% to 0.02%, with an annualized cumulative return of +9.8% and an average GDP decline of -2.7%.' Now all we need to know is if the next recession will see stocks have negative or positive returns and we will be set, though if a contraction began at the start of this month as Mr. Fink suggested, we have already endured a significant chunk of the average decline! ***** For those who like what I have to say in this forum, further market analytics and stock picks can be found in my newsletter, The Prudent Speculator.
