JPMorgan Chase CEO Jamie Dimon just issued a major warning on where he believes the US economy is heading.
At AllianceBernstein’s Strategic Decisions conference, Dimon said he’s betting unchecked government spending will end in stagflation – the term for a dreaded combination of high inflation, high unemployment and low growth, reports Fortune.
“I look at the amount of fiscal and monetary stimulus that has taken place over the last five years. It has been so extraordinary. How can you tell me it won’t lead to stagflation?
It might not. But I, for one, am quite prepared for it.”
A week ago, at the banking giant’s Global Summit in Shanghai, Dimon told CNBC he also believes the Federal Reserve may not be done raising rates.
“I think inflation is stickier than people think. I think the odds are higher than other people think, mostly because the huge amount of fiscal monetary stimulus is still in the system, and still may be driving some of this liquidity…
I look at the range of outcomes and again, the worst outcome for all of us is what you call stagflation, higher rates, recession. That means corporate profits will go down and we’ll get through all of that.”
Dimon’s economic outlook echoes a warning from JPMorgan’s chief market strategist Marko Kolanovic a few months ago.
“We believe that there is a risk of the narrative turning back from Goldilocks towards something like 1970s stagflation, with significant implications for asset allocation…
Investors should be open-minded that there is a scenario in which rates need to stay higher for longer, and the Fed may need to tighten financial conditions.”
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