Five key takeaways from Jamie Dimon’s letter to JPMorgan’s investors

five-key-takeaways-from-jamie-dimon’s-letter-to-jpmorgan’s-investors

Letter covers critical issues including the war in Ukraine, the energy crisis, sanctions, inflation and interest rates

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JPMorgan Chase & Co. CEO Jamie Dimon in Paris on June 29, 2021. Photo by Michel Euler/Pool via REUTERS/File Photo WASHINGTON — Jamie Dimon, CEO of JPMorgan Chase & Co, published his closely watched annual letter to shareholders on Monday, covering critical issues including the war in Ukraine, the energy crisis, sanctions, inflation and interest rates.

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Here are five of the key takeaways from the letter:

THE U.S. ECONOMY IS STILL STRONG… Dimon has long been bullish on the U.S. economy and repeated that message in his letter, noting the average American consumer is “in excellent financial shape” with leverage among the lowest on record, excellent mortgage underwriting, plentiful jobs with wage increases and more than US$2 trillion in excess savings.

Article content …BUT INFLATION WILL REQUIRE AGGRESSIVE RATE HIKES The Federal Reserve and the government were right to take bold actions amid the pandemic, but stimulus probably lasted too long, said Dimon. He believes the rate rises needed to rein in inflation would be “significantly higher than the markets expect.”

Dimon also had some advice for the Fed: it shouldn’t worry about the market volatility rate rises will cause unless that volatility affects the economy. It should be flexible in its plan and be prepared to respond quickly to events on the ground.

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Article content THE WAR IN UKRAINE WILL SLOW THE GLOBAL ECONOMY “The hostilities in Ukraine and the sanctions on Russia are already having a substantial economic impact,” Dimon wrote.

JPMorgan economists think that the euro area, highly dependent on Russia for oil and gas, will see GDP growth of roughly two per cent in 2022, instead of the 4.5 per cent pace expected just before the invasion began. By contrast, they expect the U.S. economy to advance roughly 2.5 per cent versus a previously estimated 3%, Dimon wrote.

“These estimates are based upon a fairly static view of the war in Ukraine and the sanctions now in place,” Dimon wrote. More Russia sanctions are possible, he noted.

“Along with the unpredictability of war itself and the uncertainty surrounding global commodity supply chains, this makes for a potentially explosive situation,” he wrote.

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Article content …THE WORLD MAY BE FACING AN “UNPRECEDENTED” MOMENT The confluence of the dramatic stimulus-fueled recovery from the pandemic, the likely need for rapid rate rises, the war in Ukraine and the sanctions on Russia may be unprecedented.

“They present completely different circumstances than what we’ve experienced in the past – and their confluence may dramatically increase the risks ahead,” Dimon wrote, adding the war will also affect geopolitics for decades.

Shopify’s 48% stock slump proves that it’s no Amazon Retail investors are ignoring something bond investors are telling markets Canadian stocks beat U.S. by most in 13 years and still have room to run WITHOUT STRONG AMERICAN LEADERSHIP “CHAOS” WILL PREVAIL “American global leadership is the best course for the world and for America,” Dimon wrote. Since nature abhors a power vacuum, it is increasingly clear that without strong American leadership “chaos likely will prevail,” he added.

However, he noted the world does not want an “arrogant” America bossing everyone around, but an America that works with allies, collaborating and compromising.

“We can organize military and economic frameworks that make the world safe and prosperous for democracy and freedom only if we work with our allies,” he added.

© Thomson Reuters 2022

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