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- Jamie Dimon and David Solomon are still wary of stubborn inflation and a potential recession.
- The JPMorgan and Goldman Sachs CEOs issued cautious economic outlooks this week.
- Dimon warned of rate hikes and possible stagflation, while Solomon predicted no cuts this year.
Persistent inflation and a full-blown recession are still firmly on the table, two Wall Street titans have warned.
Jamie Dimon told CNBC on Thursday that sticky inflation is more likely than many people think. The JPMorgan CEO pointed to the tidal wave of fiscal and monetary stimulus since the pandemic, suggesting it may still be fueling liquidity and driving up asset prices.
Dimon said interest rates, which the Federal Reserve has hiked from virtually zero to more than 5% since early 2022, could rise further — and the world was "not really" prepared for that.
Asked if a "hard landing" or recession were still possible, he replied: "Of course. How could anyone who reads history say there's no chance?"
Inflation has cooled from a 40-year high of over 9% in mid-2022 to below 4% in recent months, but remains well above the Fed's 2% target. The US economy grew at an annualized 1.6% in the first quarter, but that was down from 3.4% during the previous three months.
Dimon said the "worst outcome" would be stagflation — a painful combination of elevated inflation, higher rates, and a recession that would hit consumers and pull down corporate profits.
"The world will survive that, but I just think the odds are a little bit higher than other people think," the JPMorgan boss said, describing his outlook as cautious.
No cuts and a real slowdown
David Solomon struck a similar tone at a Boston College event on Wednesday, Bloomberg reported.
The Goldman Sachs CEO predicted there would be "zero" cuts to interest rates this year. Pointing to signs of weakening demand in recent earnings from McDonald's and AutoZone, he cautioned that consumers are being squeezed by higher prices.
"Everything is more expensive," Solomon said. "You're starting to see the consumer, the average American, feel this."
Steeper living costs have raised the chances of a "real and palpable slowdown" compared to six months ago, he added.
Both Dimon and Solomon have been warning against complacency for a while.
The JPMorgan chief said in March that he only sees a 35% to 40% chance of a soft landing. He's repeatedly flagged foreign wars, quantitative tightening, and ballooning government debt as reasons to be cautious.
Solomon also said in March that he was less certain of a soft landing than the market consensus. He noted that overseas conflicts could fuel inflation and curb global growth, and business leaders had told him lower-income consumers were cutting back and some parts of the economy were faltering.