REUTERS/Larry Downing
- Markets are too optimistic about a soft landing, JPMorgan chief Jamie Dimon told The Wall Street Journal.
- He expects soft landing odds to be half of what markets are pricing in.
- "Don't get lulled into a false sense of security because the today looks okay."
Things aren't looking particularly rosy for markets and the economy, Jamie Dimon said in an interview with The Wall Street Journal.
"The odds of a soft landing, the market kind of prices in 70%. I think it's half of that," the JPMorgan chief said. "It looks a little bit more like the '70s to me, and I point out to a lot of people, things looked pretty rosy in 1972 — they were not rosy in 1973."
Dimon referred to a US slowdown at that time, when an oil crisis sent inflation soaring and a recession took hold, a dire situation known as stagflation.
But this time around, Dimon sees different reasons for why markets should stay cautious.
That includes massive fiscal deficits and upcoming inflation drivers, from green energy initiatives to the world's rearming. Dimon also remains wary about the Federal Reserve's efforts to reduce its balance sheet, citing that no one knows the full effects of doing so.
"Don't get lulled into a false sense of security because the today looks okay, that tomorrow is gonna be okay," he said.
For now, the economy is visibly strong, Dimon said, with consumers staying in good shape. But even that hints at problems to come, given how reliant the economy has become on fiscal spending for its own success.
"The deficit is 6% of GDP, almost $2 trillion," he said. "That's driving a lot of this growth and that will have other consequences, possibly down the road, called inflation, which may not go away like people expect."
Once such problems take hold, they're also likely to stay for the long-term, extending into 2025 and 2026, Dimon warned.
His latest comments are another installment in a slew of warnings Dimon has made this past month. In his April letter to shareholders, the CEO also cautioned against market optimism, following up with similar outlooks during JPMorgan's earnings call.