Jamie Dimon warns markets are underestimating geopolitical, inflation risks

Jamie Dimon, chief executive officer of JPMorgan Chase & Co.

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon warned against complacency in the face of a slew of risks, citing everything from inflation and credit spreads to geopolitics.

Dimon said the chances of elevated inflation and stagflation are greater than people think, cautioned that America’s asset prices remain high and said that credit spreads aren’t accounting for the impacts of a potential downturn.

“Credit today is a bad risk,” he said at the firm’s investor day on Monday. “The people who haven’t been through a major downturn are missing the point about what can happen in credit.”

The Trump administration’s fast-changing tariff policies sent markets spiraling on recession fears and concerns about the safety of US assets, but they’ve rebounded as the president touted progress in tariff negotiations. Even after the US was stripped of its last top credit rating by Moody’s Ratings on Friday, the S&P 500 erased an initial decline on Monday as traders seemed to look beyond the downgrade.

“People feel pretty good because you haven’t seen an effect of tariffs,” Dimon said. “The market came down 10%, it’s back up 10%; I think that’s an extraordinary amount of complacency.”

Tariff negotiations are still ongoing with several economies, including Japan, South Korea, India and the European Union. Trump recently agreed to a trade framework with the UK and to a mutual temporary tariff reduction with China to buy more time for talks.

Even at the lower levels, the levies remain “pretty extreme,” Dimon said. It’s unclear how countries will respond and it will also take time to ramp up manufacturing in the US, he added. Dimon also pointed out that corporate earnings estimates are likely to fall.

“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 said, also reiterating that geopolitical risks remain very high.

Guidance Affirmed
Still, the bank will be fine amid the turbulence, Dimon said. It’s sticking with its forecast for full-year net interest income — at $94.5 billion — and Chief Financial Officer Jeremy Barnum said Monday that the outlook is “probably slightly better than it was at first-quarter earnings.”

Consumers and small businesses also remain financially healthy, the bank said in a presentation. And while consumer sentiment is worsening, consumer and community banking head Marianne Lake said it’s not yet translating into changes in spending behaviors or habits. In a sign it’s preparing for such a deterioration, JPMorgan in April said it had added $973 million to the pile of money it sets aside to cover soured loans, dwarfing the $290 million analysts expected.

The market volatility is likely to dent the bank’s investment-banking business. Troy Rohrbaugh, co-CEO at JPMorgan’s commercial and investment bank, said it expects investment banking fees to fall by a percentage in the mid-teens compared to a year ago — more than analysts had predicted.

A lot of clients “tapped the brake” amid the volatility, Doug Petno, Rohrbaugh’s co-head, said during the session. Trump’s policies and his global trade war have stymied mergers and acquisitions while some plans to list have also been put on ice.

Still, JPMorgan expects that markets revenue — its equities and fixed-income trading businesses — could rise by a percentage in the mid-to-high single digits on the prior year, Rohrbaugh said. The bank’s stock traders took in a record haul in the first quarter, as they benefited from the turbulence, and Dimon said last week he expects the volatility to continue.

“There are too many things out there,” Dimon said Monday.