C. B. Morgan Chase CEO Jamie Dimon believes there's a better than chance the U.S. is headed toward a recession, though he doesn't see systemic problems on the horizon.
Speaking on Monday from the JPMorgan High Yield and Leverage Finance Conference in Miami, the head of the largest US bank by assets said markets may not be pricing in a strong enough possibility that interest rates will remain high for longer.
“There are things that are kind of worrying,” Dimon noted, and disagreed with the high level of probability assigned to the economy missing a recession.
“The market is kind of pricing in a soft landing. This could very well happen,” he told CNBC's Leslie Baker. “But no [market’s] The odds are 70 to 80 percent. “I'll give you half of that, that's all.”
These comments come at a time when the market has already been forced to reprice its expectations for monetary policy. While futures traders earlier this year were assigning a high probability of a strong series of interest rate cuts starting in March, they now see easing not starting until June or July, with three cuts now priced in – half of the previous cuts. Expectations.
Along with higher rates, markets have had to contend with the Federal Reserve reducing its bond holdings, a process known as quantitative tightening. While the central bank is expected to begin gradually tapering the program soon, it remains another factor in tightening monetary policy.
“It's always a mistake to only look at the year,” Damon said. “All of these factors that we talked about: QT, fiscal deficit spending, geopolitics, these things may happen over several years. But they will happen and they will have an impact, and in my opinion I'm just cautious about it all.”
However, Dimon said he does not expect a repeat of some of the other serious recessions the US economy has faced, such as the 2008 financial crisis that saw Wall Street collapse as banks were hit by the fallout from the collapse of the mortgage industry.
Rising interest rates coupled with a recession could severely impact areas such as commercial real estate and regional banks, but with limited macroeconomic impacts, Dimon said.
“If we have a recession, yes, it will get worse. If we don't have a recession, I think most people will be able to manage,” he said. “Part of this is just a normalization process. [Rates] It was very low for a long time. “If interest rates go up and we have a recession, there will be real estate problems, and some banks will have a much bigger real estate problem than others.”
Regarding regional banks, he described the issues hitting institutions like Silicon Valley Bank and Community Bank of New York as “private,” and said private credit could be hurt but not on a systemic level.
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