On Monday morning, investors flocked to JPMorgan's Manhattan campus to hear CEO Jamie Dimon rant about several critical topics. From regulation crushing the US economy to geopolitics, inflation, potential market swoons, and monetary policy, Dimon covered the most critical ones.
Let's begin with the topic of stock buybacks. Dimon said, "We're not going to buy back a lot of stock at these prices." He was responding to a question about whether stress tests will allow the bank to unleash a new buyback program in the second half of the year.
"We simply aren't going to tell you anything anymore about stock buybacks," Dimon said, adding that he wants to outsmart the hedge funds.
In markets, JPM shares sank more than 1% after Dimon's comments. As of 1245 ET, shares were down 2.2%.
Dimon then commented on credit markets, saying, "Investment-grade credit spread will be dead wrong too," adding, "It's just a matter of time."
His comments about the credit markets followed a Bloomberg interview last week in which he warned that higher interest rates and possibly stagflation could spark problems in the commercial real estate sector, leveraged firms, and private credit.
"If you have higher rates and — God forbid — stagflation, you will see stress in real estate and leveraged companies, and private credit," Dimon said last Thursday.
Dimon confirmed again, "We're not going to buy back stock now." He noted buybacks will come into play when the stock goes back down.
On regulation, Dimon said, "They make it seem like we're a hedge fund." He said regulation is "damaging America at this point."
He continued on the regulation rant, indicating how overregulation has already forced some customers to exit the banking system.
Dimon then commented on artificial intelligence, suggesting it will impact almost every job at JPM.
Back to markets, he expects another market panic someday. Potentially, that's why he's saving the dry powder of buybacks for that day.
On monetary policy, the bank exec said:
"I'm cautiously pessimistic. We have the most complicated geopolitical situation that most of us have seen since World War II, if you study history. We don't really know the full effect of QT. I find it mysterious that, somehow, it had this beneficial effect, but it's not going to have a negative effect when it goes away. I personally think inflation is a little bigger than people think and that rates may surprise people."
On inflation, he said:
"It's possible that inflation is embedded in the system at 4% for next year & there's not a damn thing anyone can do about it. That is possible. And I'm not saying it's going to happen. We don't make bets in the future, though I don't believe in central base cases at all. But that is a risk."
This is very telling of why Dimon has a slight bearish lean on the outlook.
As for a succession timetable, he said it's "well on the way" and "not five years anymore."
Dimon's ominous comments are timely. They emphasize the risks of inflation and the impact of quantitative tightening in a rapidly deteriorating geopolitical landscape as stagflation threats emerge.
