When speaking at a banking conference earlier this week, JPMorgan CEO Jaime Dimon warned present investors to “brace for impact” in the following period, as things are definitely about to get sticky.
He went on to explain the current period is still tolerable and everyone is still convinced the Federal Reserve will be successful in taming inflation.
However, not many people are able to see the “hurricane” that’s waiting for us down the road.
Rising commodity prices deliver damaging blow to US economy
Dimon did assure JPMorgan is already preparing itself for the economic storm that’s about to unfold, adding they’ll be very conservative with their balance sheet in the near future.
Two key factors are impacting the economy at the time, those being the Fed’s intent to sell off all assets, known as quantitative tightening in the economic sphere of things, and the Ukraine-Russia conflict raging on for the past three months.
JPMorgan CEO: Brace yourself for an economic hurricane
— Blockworks (@Blockworks_) June 1, 2022
In light of this, US gasoline prices hit record highs this Wednesday, with oil prices settling around $115/barrel.
Dimon believes there’s still room for them to grow, hinting at even greater gas prices in the upcoming period.
Fact is, we haven’t had a major war in Europe since 1945. The pairing of complexity and length of the Ukrainian war makes it that much harder to predict an outcome.
The economic outlook is looking grim
After EU leaders rolled out the first stage of the ban on Russian oil, crude oil surged higher than ever before.
It’s at this moment that Dimon predicted commodity prices spiking even further beyond, claiming $175 per gallon oil prices could easily become a reality.
— 🦊Kelly the Silver Fox🦊 (@FreedomHasWon) June 2, 2022
If the economic outlook wasn’t bad enough at this point, those invested in climate change will certainly be displeased by an increase in greenhouse gas emissions.
This is right around the corner, as higher gas prices will force weaker economies to revert back to coal-derivated energy.
Additionally, Dimon isn’t too sure about the Federal Reserve sticking the landing with its rate hikes. He believes they’re driving us straight into a recession in the upcoming year.
Inflation already reached 40-year record highs.
The Fed’s plan may have come a bit too late to put a dent in the issue at hand, meaning price stability isn’t going to be easily attained through half percentage point hikes proposed by Fed chair Jerome Powell.
"Probably the solution to historically terrible inflation is to forgive $10K in student loan debt." – People dropped on their heads as infants
— Ben Shapiro (@benshapiro) June 1, 2022
Unfortunately, it’s gotten to the point where quantitative tightening is the only tool they have left.
Dimon believes it to be a necessary evil at times like these when liquidity needs to be removed from the system in order to make reparations.
April’s consumer prices soared by 8.3% year-to-year. While a majority of the US workforce received pay raises, wages have still failed to keep up with speeding inflation.
This is putting millions of American families in less-than-favorable positions. Now, the worst is yet to come.