JPMorgan President Jamie Dimon said a so-called “Goldilocks” economy, with growth that is neither too hot nor too cold, may not be able to save the U.S. from recession as the government faces “huge deficits.” I warned you that there is.
“I'm a little skeptical of this Goldilocks scenario. I still think there's a better chance than others that it won't be a soft landing,” Dimon said. fox business From San Francisco, where JPMorgan will host its 42nd annual Healthcare Conference from January 8th to 11th.
Dimon warned of a number of issues that could disrupt the economy in the coming months, including the coronavirus relief package that is set to expire by the end of the year.
“The extra money is [consumers] The trillions of dollars gained during the coronavirus pandemic are running out. It's been delayed for a variety of reasons, but it's going to expire this year,” Dimon told FOX.
The U.S. Small Business Administration has struggled to preserve Economic Injury Disaster Loan (EIDL) and Paycheck Protection Program (PPP) adjustments made during the pandemic, introducing a 60-day extension of concessions for borrowers on Friday.
“For COVID-19 EIDL and PPP borrowers with loan amounts less than $100,000, SBA has implemented a 60-day goodwill exception period beginning January 1, 2024 and running through March 3, 2024.” SBA said. announced.
Other coronavirus-related federal programs have expired, including Pandemic Unemployment Assistance, Pandemic Emergency Unemployment Compensation, and extended benefits.
However, “the government [also] is running a huge deficit and that will impact the market,'' the 67-year-old boss of the world's largest bank also warned on Tuesday's Fox show.
The country's debt has increased and recently reached an all-time high of more than $34.1 trillion.
Michael Chamberrest, head of markets and investment strategy in JPMorgan's wealth management division, predicted dire consequences for the economy if the Biden administration doesn't start tackling debt, calling it a “boiled frog” for the economy. Said to be similar to. .
The concept of “boiling a frog” comes from a metaphor used to describe situations in which a series of undesirable conditions are tolerated over an extended period of time, such as a frog being thrown into water that gradually heats up.
When the situation becomes too dire and the water boils, it is too late for the frog to act and it is cooked alive.
The Congressional Budget Office's January 2020 projections indicate that the total federal debt will not exceed $34 trillion until fiscal year 2029.
But debt rose faster than expected due to increased government spending due to the 2020 pandemic that shut down much of the U.S. economy.
Dimon seemed optimistic that even if the U.S. economy were to go into recession, the consequences would not be “terrible.”
“There could be a mild recession, and there could be a deep recession. It's clear that all of us in business have to learn how to deal with the ups and downs of the economy. …But the cross-currents are quite high. I think: funds are running out, interest rates are high, QT [quantitative tightening] It hasn’t happened yet,” Dimon told Fox.
Wall Street weighed more on Dimon after Federal Reserve Chairman Jerome Powell suggested the central bank's historic monetary tightening policies were likely to end following the latest Federal Open Market Committee meeting. Be optimistic that Americans will receive up to three interest rate cuts in 2024.
Borrowing rates are currently at a 22-year high of between 5.25% and 5.5%, a 10-year low for the U.S. economy as the Federal Reserve struggles to keep inflation at its 2% target. This is a level never seen before, and it is likely that this level will be maintained in the future. Mr Powell said it would not be possible to achieve this by 2025.
A key indicator for Fed officials is inflation, which rose 3.1% in November.
The U.S. Bureau of Labor Statistics is scheduled to release its Consumer Price Index for December, which tracks changes in the cost of everyday goods and services, on Thursday.
Economists at FactSet expect the measure to show a 3.2% advance, which could delay the Fed's long-awaited first rate cut.
Bank of America analysts said in a note to clients on Tuesday that if inflation beats expectations, “the Fed will remain in wait-and-see mode” and could push off rate cuts until later in the year.
Wall Street analysts say the Fed could cut rates as early as March, but that could be a silver lining if inflation remains above the central bank's 2% target. It may be an observation.
