JPMorgan CEO Jamie Dimon on Friday said the global trade war is adding to an uncertain economic environment that the world’s largest bank will continue to navigate for the foreseeable future.
“The economy is facing considerable turbulence (including geopolitics), with the potential positives of tax reform and deregulation and the potential negatives of tariffs and ‘trade wars,’” Dimon said.
Despite surging revenue from JPMorgan’s markets and investment banking businesses, Dimon said recent turmoil threatens those key units.
“Clients have become more cautious amid an increase in market volatility driven by geopolitical and trade-related tensions,” Dimon added.
Dimon noted inflation remains “sticky,” as certain parts of the economy, especially housing, have not receded from the alarming price hikes over the past few years. Despite the US Bureau of Labor Statistics announcing the lowest annual inflation rate in six months, economists are deeply concerned about rising inflation in the wake of President Donald Trump’s enormous tariffs that he has imposed over the course of the past couple months.
In addition to trade and tariffs, Dimon warned that high fiscal deficits and volatility also posed threats to the global economy.
“As always, we hope for the best but prepare the firm for a wide range of scenarios,” he said.
Some background: JPMorgan posted quarterly earnings of $14.6 billion Friday that beat Wall Street’s estimates. JPMorgan kicked off earnings season that market analysts will watch closely for signs of stress as Trump’s tariff regime kicks into full gear.
JPMorgan’s stock price rose 3.4% in premarket trading.
Stocks have grabbed headlines since President Donald Trump unveiled his tariffs, but an unsettling shift has also emerged in the bond market.
Earlier this week, as stock markets around the world declined, US Treasuries also sold off. Stocks and bonds declining in tandem raised red flags.
Typically, when investors sell off stocks in times of crisis, they pile into Treasuries, seen as a “safe haven” asset. This time, that did not happen.
The sell-off in bonds was so unsettling that it spooked the White House.
“People were getting a little queasy,” Trump said Wednesday as he told reporters he was watching the bond market. “The bond market is very tricky,” he said.
A tanking stock market did not make Trump U-turn on his trade policy, but turmoil in the bond market that made him blink and delay many of his tariffs.
“The ‘blink’ came sooner than we expected, probably forced by the markets,” said Mohit Kumar, chief economist and strategist for Europe at Jefferies, in a note Thursday.
The yield on the benchmark 10-year US Treasury note spiked as high as 4.5% on Wednesday. It was a whiplash reversal after falling below 4% and hitting its lowest level since October just days before. Yields and bond prices trade in opposite directions.
Although yields fell after Trump’s U-turn, the danger does not appear to be over yet. The 10-year Treasury yield has climbed again and was at 4.4% early Friday morning.