While the economic outlook remains complex with inflation, Fed rate hikes and a war in the mix, two major bank CEOs are not predicting a U.S. recession — at least in the next couple of quarters.
The economy loomed large in quarterly updates this week from banks, which posted lower first-quarter profits across the board.
Asked point-blank by an analyst if he expects negative GDP in the near future, JPMorgan Chase & Co.
CEO Jamie Dimon — one of the most visible leaders on Wall Street — said “no” on Tuesday, as he reflected on cautious remarks in his annual letter to shareholders.
“First of all, I can’t forecast the future any more than anyone else,” Dimon said. “And the Fed forecasts it, and everyone forecasts it, and everyone’s wrong all the time. And I think it’s a mistake. …We know there are going to be ups, we know there are going to be downs. We know the weather’s going to change, and a lot of stuff like that.”
Dimon said he sees very strong underlying growth right now and the U.S. consumer is “not stoppable” as workers benefit from higher employment rates and pay down their credit cards.
“Confidence isn’t high, but the fact that they have money, they’re spending their money, they have $2 trillion still in the savings and checking account,” Dimon said. “Businesses are in good shape. Home prices are up. Credit is extraordinarily good. So you have this, that’s one factor. That’s going to continue in the second quarter, third quarter. And after that, it’s hard to predict.”
CEO David Solomon said Russia’s invasion of Ukraine has further complicated the geopolitical landscape and created an additional level of uncertainty that he expects will outlast the war itself.
“While it is encouraging to see newfound unity among the Western democracies, the trend towards deglobalization is clearly gaining momentum,” Solomon said Wednesday. “The consequences of that shift are likely to be significant and long lasting, and I believe it will take some time to fully appreciate all the second- and third-order ramifications.”
Solomon said U.S. unemployment levels remain low and wages are increasing, but inflation is the highest it’s been in decades, and while he cited these as complexities to consider he did not use the word “recession” to describe the near future.
“We’re seeing new stress on supply chains and commodity prices, and U.S. households are facing rising gas prices as well as higher prices for food and housing,” Solomon said. “We’re also seeing an increased risk of stagflation and mixed signals on consumer confidence. These cross currents will certainly create ongoing complexity in the economic outlook.”
Goldman also sees “lots of areas” with growth in the economy. Despite a slowdown in investment banking and capital-markets activity, Solomon said deal flow will continue, but slower than the recent bumper-crop years.
“The opportunity to see monetizations, to see transactions, I think continues, just probably not at the same pace and velocity as we saw in 2020 and 2021,” he said.
CEO Jane Fraser said the bank has also heard concerns about the global economy in meetings overseas.
“Back recently from seeing clients in Europe and the Middle East, it is security, yet energy, food, defense, cyber or operational resilience that has risen to the top of their strategic dialogue,” Fraser said on Citi’s quarterly conference call. “The macro outlook for the rest of the year can only be described as complex and uncertain, and while my job is to prepare for all outcomes, our view is that strong nominal income growth and continuing momentum in the labor market will help support near-term growth in the U.S. economy in the face of inflationary pressures.”
Citi expects material regional differences in the impact with economic growth in the individual consumer and businesses in Europe hit hardest, she said.
“Energy and commodities are at the center of the storm globally, but we don’t believe we’re at the start of a new long super-cycle, and we do expect prices to fall to more normal levels,” Fraser said.