JPMorgan Chase CEO Jamie Dimon thinks that the U.S. economy is indeed headed toward recession. He points to the intensifying trade war with China as one of the biggest forces pushing this concern. His remarks come as President Donald Trump’s tariffs create significant volatility in financial markets, leading to fears of economic contraction.
As Jamie Dimon said in a recent quarterly missive, “markets are never right but occasionally are right. It shows you just how pessimistic the mood has become on Wall Street, where recession fears have come to a head. As you know, the U.S. has gone ahead with large tariffs on Chinese goods, forcing response tariffs from China. In reaction to these scenarios, investors are pulling back.
Stocks and bonds saw a frenzied dumping on the trading floor. Dow futures were down more than 800 points in morning trade. This downward trend is a bellwether of investor fear about long-term economic security. Yields on 10-year Treasury bonds increased by almost 20 basis points (0.2 percentage points). This sudden uptick is the first indicator we’ve seen of an increase in uncertainty in the financial markets.
Dimon elaborated on the potential economic outcomes, stating, “I think probably that’s a likely outcome, because markets, I mean, when you see a 2000-point decline in the Dow Jones Industrial Average, it sort of feeds on itself, doesn’t it.” His remarks to me emphasize the cycle between the psychology of the markets and the psychological factors driving economic forecasts.
Still, JPMorgan economists forecast a 0.3% contraction in U.S. gross domestic product (GDP) this year. This is a dramatic reversal to the robust growth just one year ago. As a result, the firm’s surprisingly timid forecast underscores all of the uncertainty still gripping the financial industry. This already precarious environment worsens as the trade war continues to intensify.
The ramifications of these trade policies are extensive, arcane and growing, yet increasingly malevolent to investors. The uncertainty about how high tariffs will go remains a key factor shaping market actions. With stock markets crashing and bond yields soaring, certainly a significant number of alpha-seeking investors are hunkering down for stormy economic weather.