Jamie Dimon, CEO of JPMorgan, has issued a stark warning about the US economy, stating that the Middle East conflict could trigger a new cycle of inflation and high interest rates, ultimately leading to a recession. In his annual shareholder letter on 6/4, Dimon acknowledged the current strength of the US economy, noting it is better positioned to resist global risks. However, he emphasized, "that doesn't mean the risk of recession disappears."

The ongoing conflict with Iran, now over one month old, significantly increases the risk of major shocks to global oil and commodity prices. This situation could also disrupt global supply chains, mirroring the challenges seen after the Covid-19 pandemic. Dimon cautioned that the world might face another period of prolonged high inflation and sharp interest rate hikes, similar to 2021-2023, as the Federal Reserve (Fed) and other central banks work to control prices.

JPMorgan CEO Jamie Dimon at a conference in California, US. Photo: Reuters

Dimon described rising inflation and interest rates as "party crashers" for the stock market, predicting a potential decline this year. He highlighted that despite its current robustness, the US economy relies on sustained growth and a healthy stock market to maintain its momentum. Should these key factors reverse, current underlying risks could escalate into significant problems.

High government debt, for instance, remains manageable as long as gross domestic product (GDP) maintains good growth and interest rates stay relatively low. However, this substantial debt could transform into a future crisis if not effectively managed.

Current high stock prices are partly attributed to global volatility, with US stocks often perceived as a safe haven. Yet, history shows the US has not been immune to recessions and bear markets. A downturn could trigger investor panic, creating a negative feedback loop. "Human nature does not change. Psychology and confidence can fluctuate very quickly and dominate markets. Falling asset prices can quickly reverse sentiment and make investors switch to holding cash", Dimon concluded.

JPMorgan is currently the largest US bank by asset size, and Dimon is a prominent voice on Wall Street. He is recognized for his cautious outlook, frequently warning about the risks of recession, inflation, and high interest rates, particularly for the US economy.

Despite these warnings, Dimon's letter also projected a positive outlook for the US economy heading into 2026. Factors such as tax cuts, deregulation, President Donald Trump's business-friendly agenda, and Republican spending legislation are expected to inject an additional 300 billion USD into the US economy this year, potentially boosting GDP growth by about 1%. Furthermore, significant investments in artificial intelligence (AI) and related technologies are anticipated to enhance US productivity.

Ha Thu (Reuters, CNN)