JPMorgan Chase CEO Jamie Dimon has cautioned that investors are underestimating the risks facing global markets, warning of an “extraordinary amount of complacency” as the impact of new tariffs and other economic pressures has yet to fully play out.
Speaking during JPMorgan’s annual investor day, Dimon said that a range of emerging threats – from escalating tariffs to shifting global trade relationships – could have unpredictable consequences. He expressed particular concern about the potential for inflation to rise and for stagflation to take hold, with stagnant growth paired with persistent price increases.
“When I see all these things adding up on the fringes of extreme, I don’t think we can predict the outcome,” Dimon said. “The chance of inflation going up and stagflation is a little bit higher than other people think. There are too many things out there, and I think you’re going to see the effect.”
Dimon pointed out that even current tariff levels are extreme by historical standards, and that global trading partners are already responding by striking new deals among themselves. The US, he said, cannot simply shift to domestically produced alternatives, as building new manufacturing capacity takes several years at a minimum.
The comments come after President Donald Trump announced sweeping new tariffs on trade partners in early April, only to partially reverse them a week later. The temporary reprieve is intended to give countries time to negotiate, but US trade officials are now racing to reach new agreements as nearly 100 countries have indicated they are ready to enter talks.
Last week, the US and China made headlines with a surprise agreement to reduce tariffs on each other’s goods for an initial 90-day period. Still, tariffs of at least 30% remain on most Chinese imports, putting added pressure on both small businesses and major retailers in the US.
Potential credit risks
Dimon also highlighted potential credit risks, arguing that the odds of stagflation are likely twice as high as most forecasts suggest. He predicted that credit losses could rise – not to the levels seen during the 2008 financial crisis, but worse than many expect, especially after a decade and a half of easy credit and looser lending standards.
“There have been 15 years of pretty happy-go-lucky credit, a lot of new credit players, different covenants, different leverage ratios, leverage on top of leverage,” he noted. “I think credit would be worse than people think of in every recession.”
Moody’s recently downgraded the United States’ credit rating, stripping the country of its last remaining AAA rating due to surging federal debt and political deadlock over budget solutions. The move followed a similar downgrade from other major agencies, marking the first time since 1917 that all three have given US Treasuries a lower rating.
Despite these warnings, US stocks ended Monday modestly higher. The Dow Jones gained 137 points, the S&P 500 ticked up by 0.09%, and the Nasdaq rose 0.02%. However, US Treasury yields climbed, with the benchmark 10-year near 4.5% and the 30-year just below 5%. The dollar fell 0.6% against a basket of currencies, while gold jumped 1.5% to $3,232 a troy ounce as investors sought safety.
For American investors, the year has been a wild ride. Early optimism about President Trump’s business-friendly policies pushed stocks to record highs in February, only to be followed by heightened anxiety over trade policy and a wave of selling that analysts have dubbed the “sell America” trade.
