Jamie Dimon (JPMorgan Chase): Recession Will Hit the U.S. Economy in Six to Nine Months

JPMorgan Chase CEO Jamie Dimon predicts that the U.S. economy will face a recession next year and warns that the downturn could trigger ‘panic’ in credit markets and wipe an additional 20 percent off the value of U.S. stocks, reported the Financial Times.

Dimon’s comments on the economy, whose statements are closely monitored by numerous investors, come after similar remarks and forecasts from billionaire investor Ken Griffin last month and indicate a growing consensus among major players on Wall Street regarding the likelihood of a recession in the U.S. In a recent interview with CNBC, Dimon cited rising interest rates and the Russian invasion of Ukraine as key factors increasing the risk of a downturn in 2023.

– These are very, very serious things, which I think will likely push the U.S. and the world (although Europe is already in recession) into some kind of recession six to nine months from now – said Dimon.

The S&P 500 Index Will Continue to Decline

He added that early signs of trouble are evident in the financial system, pointing to a depressed IPO market and high-yield debt deals, and predicts that problems will soon spread to other areas.

– The place where we will likely see more cracks and perhaps a bit more panic is in the credit markets – he commented. In June, Dimon warned of an economic ‘hurricane’, and recently urged investors to be ‘very, very cautious’.

– If you need money, go get it – he commented. Dimon believes that the lowest value of the S&P 500 stock index, which has fallen more than 20 percent this year, could drop ‘by an additional 20 percent’.

– I think the next 20 percent will be much more painful than the first. An increase in rates by an additional 100 basis points is much more painful than the first 100 because people are not used to it – Dimon stated.

JPMorgan, the largest U.S. bank by assets, will report earnings on Friday. Analysts expect JPMorgan and other major banks to set aside more than four billion dollars to cover potential losses from bad loans, which is a sign of growing pessimism for the U.S. economy.

‘World Does Not Produce Enough Oil and Gas’

We know that the U.S. is the world’s largest oil producer, producing 18.9 million barrels of fuel per day, according to the Energy Information Administration (EIA). However, the U.S. is also the world’s largest oil consumer, so its exports are limited. In comparison, the de facto OPEC leader and major oil exporter, Saudi Arabia, produces 10.8 million barrels of oil per day but consumes only 3.2 million daily, exporting the rest, EIA states.

Although the U.S. indeed has vast energy reserves, the industry’s exports are at maximum levels and cannot be increased overnight, U.S. shale producers told the Financial Times in recent months. Dimon’s comments came a few days after OPEC and its allies agreed to cut oil production in response to a weaker global economy.

The White House commented that U.S. President Joe Biden is ‘disappointed by the shortsighted decision’.

Janet Yellen, U.S. Secretary of the Treasury, shares Biden’s view and told FT in a Sunday interview that OPEC’s decision is ‘useless and unwise’. Yellen made this comment ahead of the ongoing annual meetings of the International Monetary Fund and World Bank in Washington this week, where rising inflation will be a key topic of discussion.

Dimon told CNBC that there is currently a long-term problem that the world does not produce enough oil and gas to reduce coal usage and transition to renewable energy. He described this issue as ‘critical’ and said that ‘this should be treated almost as a wartime issue at this point, nothing less than that.’