Financial services giant JPMorgan Chase & Co. JPM reported a fourth-quarter beat and a record quarterly profit, sending its shares higher in premarket trading on Friday. CEO Jamie Dimon, meanwhile, issued a cautious commentary about the economy in the earnings release.
What Happened: Discussing the current state of the economy, Dimon said, “The U.S. economy continues to be resilient, with consumers still spending, and markets currently expect a soft landing.”
He also singled out the risks facing the economy. “It is important to note that the economy is being fueled by large amounts of government deficit spending and past stimulus,” he said. The U.S. debt is trending at a staggering $34 trillion and is expected to explode to the upside in the near- to medium-term.
The industry veteran also highlighted the probability of government spending shooting up. “There is also an ongoing need for increased spending due to the green economy, the restructuring of global supply chains, higher military spending and rising healthcare costs,” JPMorgan’s top brass said.
”This may lead inflation to be stickier and rates to be higher than markets expect.”
Dimon warned of other downside risks, such as quantitative tightening draining over $900 billion of liquidity from the system annually and the ongoing wars in Ukraine and the Middle East that could potentially disrupt energy and food markets, migration, and military and economic relationships.
“These significant and somewhat unprecedented forces cause us to remain cautious,” he said in the statement.
See Also: Best Inflation Stocks
Why It’s Important: Dimon’s comments assume importance as the December consumer price inflation data came in slightly ahead of expectations, sending investors to the defensive. The monetary policy trajectory is uncertain as Federal Reserve Chair Jerome Powell and his fellow Fed officials have predicated potential rate cuts on continued easing of pricing pressure.
Analysts also fear a potential hard landing as the lagging impact of the central banks’ successive and aggressive rate hikes returns to haunt. The Fed funds rate is currently at a 22-year high of 5.25%-5.50%, with the central bank on a pause mode for the past three meetings.
The markets ran up in late 2023 in hopes the Fed would reverse the rate hikes.
The SPDR S&P 500 ETF Trust SPY, an exchange-traded fund that tracks the performance of the broader S&P 500 Index, fell 0.20% to $475.40 in premarket trading on Friday, according to Benzinga Pro data.
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