Jamie Dimon has led JPMorgan Chase for almost two decades — making the 68-year-old one of the longest serving Wall Street CEOs today.
During his tenure at JPMorgan, Dimon has also become one of America’s most respected bankers and thought leaders, owing to a strong track record of safely steering the bank through a number of storms, from the global financial crisis of 2008 to the COVID-19 pandemic to the geopolitical and economic turmoil of the last couple years.
Building up its so-called “fortress balance sheet” over the last two decades, JPMorgan is now the largest U.S. bank, with almost $3.4 trillion in assets. In 2023, the bank raked in a record $49.6 billion in profits.
Each year, shareholders, analysts, and Wall Street observers alike watch his annual letter to shareholders for Dimon’s thoughts on the state of the economy and his reflections on some of the biggest challenges facing JPMorgan and the world. Here are some of the biggest insights and takeaways from Dimon’s latest letter to shareholders, released Monday.
Interest rates above 8%?
Dimon cast doubt on the interest rate cuts expected by analysts later this year.
The bank is “prepared for a very broad range of interest rates, from 2% to 8% or even more,” paired with an equally wide range of economic outcomes, Dimon said, citing the inflationary effects of “ongoing fiscal spending, remilitarization of the world, restructuring of global trade, capital needs of the new green economy, and possibly higher energy costs in the future… due to a lack of needed investment in the energy infrastructure.”
Basically, Dimon said, anything can happen. The U.S. economy could see strong growth with moderate inflation, or a worst-case scenario of stagflation, a recession with inflation. In either case, higher interest rates are possible.
The Federal Reserve has left interest rates at a 23-year-high of between 5.25% and 5.5% as it deployed intensive quantitative tightening to try to bring inflation down to its 2% target. And the central bank has showed little interest in rushing to bring rates down.
Federal Reserve Bank of Minneapolis President Neel Kashkari said Thursday that the central bank may not cut interest rates at all in 2024 if inflation remains persistently high. The consumer price index rose 3.2% in February, slightly more than expected.
And given its acquisition of First Republic last year following the regional banking crisis, JPMorgan is keeping an eye on the potential impact these pressures could have on the banking system — and beyond. High rates interest paired with inflation could mean “plenty of stress,” Dimon said.
Whatever the economic outcome, Dimon wrote, JPMorgan would continue to perform “at least okay” since, he said, the company is prepared for just about any scenario.
Uncle Sam’s wartime leadership
The world may be entering “one of the most treacherous geopolitical eras since World War II,” Dimon wrote. The wars in Ukraine and Gaza, paired with leftover pandemic-era effects and looming threats from China, could be creating risks that eclipse anything the world has seen since the 1940s, he said.
Dimon sees one clear path forward: American leadership.
“In the free and democratic Western world, and, in fact, for many other countries, there is no real or good alternative to America,” he wrote.
America, Dimon said, has “the most extensive group of partners, friends and allies — both military and economic — that the world has probably ever seen” — but he said that should be put to better use.
Using Ukraine as an example, Dimon underscored the importance of the country’s victory against Russian invasion.
“If the war goes badly for Ukraine, you may see the splintering of Pax Americana, which would be a disaster for the whole free world,” he said. “Ukraine’s struggle is our struggle, and ensuring their victory is ensuring America first.”
American (economic) exceptionalism
It’s time to celebrate American exceptionalism, not shy away from it, Dimon said.
“We can safely say that America is an exceptional nation built and grounded on principles — principles of freedom of speech, freedom of religion, free enterprise (capitalism), and the freedom and empowerment brought to us by our democracy through the power to elect our leaders and of our Constitution, which makes these individual freedoms sacrosanct,” Dimon wrote.
But the international order established at the end of World War II, which placed the U.S. in a hegemonic position, may be in need of a facelift. While not necessarily calling for a complete overhaul, Dimon said it might be a good idea to improve on the existing international system.
“The time may be right for a reimagined Bretton Woods — and by this, I mean revitalizing our global architecture,” he said, referring to the international financial system established in the 1940s. “Since too many parts of the world have been neglected, any new system has to take into account and properly address the needs of all nations, including areas of concentrated poverty.”
The U.S. can begin to turn some of these tides by making a concerted effort to counter China’s rise as an economic superpower, improve trade relationships, and craft better industrial policy, he said.
An AI future
Dimon doubled down on his views on AI. After calling generative artificial intelligence “critical” to the bank’s future success in his 2022 letter, the CEO likened the potentially transformative consequences of AI to that of the “printing press, the steam engine, electricity, computing and the Internet, among others.”
In the last year, the bank more than doubled its AI and machine learning (ML) experts and data scientists, and has increased the number of use cases for the technology across its businesses.
“Over time, we anticipate that our use of AI has the potential to augment virtually every job, as well as impact our workforce composition,” he wrote, adding that while it may reduce jobs in some areas, it will create ones in others.