JPMorgan CEO: Recession may be unavoidable, believing in the sustained prosperity of the US economy for many years would be a "huge mistake"

On Monday, September 11th, Jamie Dimon, CEO of JPMorgan Chase, expressed his concern that investors would make a "huge mistake" if they believed the current strong performance of the US economy would continue for many years.

Dimon's concerns include central banks such as the Federal Reserve controlling liquidity through "quantitative tightening," geopolitical tensions, and governments around the world spending money "like drunken sailors":

It would be a huge mistake to assume that today's strong consumer spending indicates a prosperous economic environment for the next few years.

Dimon stated that the healthy balance sheets of consumers and rising wages are currently supporting the US economy, but there are also risks in the future.

In the past year, the extent of the US economic downturn exceeded the expectations of many investors, including Dimon. Last year, he warned that an impending economic storm was approaching. However, it turned out that the US economy was more resilient than Wall Street had expected. Now, many economists predict that the US economic recession may be avoided, achieving a "soft landing" that reduces inflation without significantly increasing the unemployment rate.

However, Dimon poured cold water on these expectations:

Companies feel very good about themselves because they focus on current performance. But things will change, and we don't know what will happen 12 or 18 months from now.

Dimon stated that although JPMorgan Chase and other banks have been "overprofitable" in lending due to historically low default rates, there is now pressure on some residential mortgage loans and subprime auto loans:

If the US economy really experiences a recession, then the credit cycle will truly return to normal. In a normal credit cycle, some things always perform worse than expected.

Dimon mentioned that JPMorgan Chase is currently repurchasing stocks at "lower levels" than before, and this pace may continue until 2024 as the bank saves capital to comply with upcoming new regulatory rules.

He described the new regulatory rules as "very disappointing" and urged regulatory agencies to increase transparency, stating that JPMorgan Chase must hold about 30% more capital than European banks:

Is this what they want? Is it good in the long run? What is the original intention of regulation?

When asked if the IPO and M&A markets were heating up due to the upcoming listing of Arm, Dimon encouraged CEOs of companies preparing to go public to take action instead of continuing to wait and see:

I believe there is still a great deal of uncertainty ahead of us, and it is very dangerous.

Dimon is not the first Wall Street tycoon to warn investors not to be blindly optimistic.

Earlier this month, Jeremy Grantham, the famous Wall Street bear known for predicting market bubbles, pointed out that the Federal Reserve's most aggressive tightening policy in forty years could lead to an economic recession and drag down the stock market.

The co-founder of GMO, a Boston-based asset management company known for its market bubble predictions, stated:

The reason is simple: low interest rates have pushed up asset prices. Higher interest rates would depress asset prices. And in the era we are in now, the average interest rate will be higher than the level of the past 10 years.

Legendary investor Grantham, who successfully predicted three market bubbles, pointed out that the surge in the stock market after the pandemic is "roughly comparable in many ways to the 2000 technology bubble," but the frenzy surrounding artificial intelligence has delayed the stock market's deflation.

At the same time, Michael Wilson, the staunch bear from Morgan Stanley, also believes that the growth of the U.S. economy this year will be weaker than expected, and U.S. stock investors will soon be disappointed by this.