Getty/Win McNamee
- Jamie Dimon expects the Federal Reserve's war on inflation to shake markets at some point.
- The JPMorgan CEO predicts further interest-rate hikes will catch some unprepared companies out.
- Dimon warns overseas conflicts are a key concern and could hit the American economy.
Investors should prepare for turmoil as the Federal Reserve forges ahead in fighting inflation, Jamie Dimon says.
"I personally believe that at one point it will rattle the markets," the JPMorgan CEO told Yahoo Finance on Wednesday, referring to the Fed's efforts to curb price growth by raising borrowing costs and shrinking the US money supply. "You're going to see markets get a little rattled."
Dimon suggested the recent volatility in Treasuries could ramp up, as liquidity has worsened and there's hasn't been "real pressure" in the overnight and repurchase-agreement or "repo" markets yet.
The bank chief also warned the Federal Reserve might not be done raising interest rates, after lifting them from virtually zero to over 5% since early last year. He flagged the risk that inflation proves stickier than expected after more than a decade of easy money and carefree government spending, and the central bank might have to hike rates further.
"I just think that there's a lot of deficit financing, and that may cause long-term rates to go and stay higher, and inflation for a little bit longer," he said.
Dimon cautioned that steeper rates could spell trouble for unprepared businesses. JPMorgan acquired First Republic after the regional lender and several of its peers were caught off guard this spring.
"Warren Buffett talks about when the tide goes out — you're going to see quite a few people swimming naked," Dimon said. "They had embedded interest-rate exposures they didn't understand, they couldn't take the double whammy of stagflation or bad real estate, or something like that."
The billionaire banker also warned that current geopolitical issues should be a pressing concern for investors.
"It's Ukraine, Israel, war, death, free nations in Europe," he said, adding the international tensions are affecting global trade, alliances, and US-China relations. "I would put that in the worry category."
Dimon noted those conflicts could dictate whether the US growth slumps and unemployment jumps, or the nation escapes its inflation headache with minimal fallout.
"It'll have an effect on the economy, and it may determine whether the economy goes to hard landing or soft landing," Dimon said. "Hopefully these things will diminish, but they may not."