Jamie Dimon says inflation and Ukraine war may dramatically increase risks to the US

Jamie Dimon, CEO of JPMorgan Chase speaks before the Economic Club of New York in New York, January 16, 2019.

Carlos Allegri | Reuters

jamie dimondCEO and chairman of the largest US bank by assets outlined a potentially unprecedented combination of risks facing the country in his annual letter to shareholders.

Three forces are likely to shape the world over the next few decades: a US economy recovering from the covid pandemic; high inflation that will usher in an era of rising rates, and Russia invasion of ukraine and the resulting humanitarian crisis now ongoing, according to Dimon.

“Each of these three factors listed above is unique in its own right: the dramatic stimulus-driven recovery from the COVID-19 pandemic, the likely need for rapid rate hikes and the required reversal of QE, and the war in Ukraine. and sanctions on Russia,” Dimon wrote.

“They present entirely different circumstances than we have experienced in the past, and their confluence can dramatically increase future risks,” he wrote. “While it is possible and hopeful that all of these events will have a peaceful resolution, we must prepare for possible negative outcomes.”

Dimon’s letter, widely read in business circles because of the JPMorgan The CEO’s status as the most prominent spokesperson for his industry took on a more dejected tone from his missive last year. While he wrote extensively about the challenges facing the country, including economic inequality and political dysfunction, that letter conveyed his belief that the United States was in the midst of a boom that could “easily” reach 2023.

Now, however, the outbreak of Europe’s biggest conflict since World War II has turned things around, roiling markets, realigning alliances and reshaping global trade patterns, he wrote. That presents both risks and opportunities for the United States and other democracies, according to Dimon.

“The war in Ukraine and sanctions on Russia will, at a minimum, slow the global economy, and it could easily get worse,” Dimon wrote. That is due to uncertainty about how the conflict will end and its impact on supply chains, especially those related to energy supply.

Dimon added that for JPMorgan, management is not concerned about its direct exposure to Russia, although the bank could “still lose about $1 billion over time”.

Here are excerpts from Dimon lyrics.

On the economic impact of the war

On Russian sanctions

A ‘wake-up call’ for democracies

Implications beyond Russia

On the need to reorder supply chains

Specifically…

Brazil, Canada and Mexico will benefit

at the Federal Reserve

‘Very volatile markets’

Fed Flexibility

On JPMorgan’s rising spending

“This year, we announced that the investment-related expenses would increase from $11.5 billion to $15 billion. I’m going to try to describe the ‘incremental investments’ of $3.5 billion, although I can’t review all of them (and for competitive reasons I wouldn’t). But we hope that some examples will reassure you in our decision-making process.

Some investments have a fairly predictable time to generate positive cash flow and a good, predictable return on investment (ROI), regardless of how you measure it. These investments include branches and bankers, all over the world, in all of our businesses. They also include certain marketing expenses, which have a known and quantifiable return. This combined category will add $1 billion to our spending in 2022.

About acquisitions

global expansion

About JPMorgan’s Diversity Drive

“Despite the pandemic and talent retention challenges, we continue to boost our representation among women and people of color. … More women were promoted to CEO in 2021 than ever before; Similarly, a record number of women were promoted to CEO. At the end of the year, according to self-identified employees, women represented 49% of the company’s total workforce. Hispanic representation overall was 20%, Asian representation grew to 17%, and Black representation increased to 14%.”

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