Jamie Dimon has said he is optimistic that the pandemic will end with a U.S. economic rebound that could last for at least two years.
“I have no doubts that with surplus savings, new stimulus economies, huge deficit spending, more quantitative easing, a potential new infrastructure bill, a successful vaccine and the euphoria towards the end of the pandemic, the US economy is likely to explode, ”the JPMorgan Chase & Co. CEO said Wednesday in its annual letter to shareholders. “This boom could easily continue until 2023.”
Unprecedented federal bailouts have blunted unemployment and averted further deterioration in the economy, according to Dimon, who said the banks had entered the crisis strong and able to help communities weather the storm. While lenders have also benefited from the US stimulus, they have built buffers against future loan losses and performed well in stress tests, he said.
Dimon also pointed to American consumers, who used stimulus checks to reduce debt to the lowest level in 40 years and hid them in savings, giving them – like businesses – “extraordinary” purchasing power. once the blockages are over. The latest round of quantitative easing will have created more than $ 3 trillion in deposits in US banks, some of which can be loaned, he said.
All of this could add up to a Goldilocks moment, according to Dimon, when growth is rapid and sustained while inflation is slowly rising. Threats to this outcome include viral variants and a rapid or sustained rise in inflation that prompts rates to rise earlier.
At 65, Dimon is the most prominent executive in the World Bank, serving as an industry spokesperson while leading a titan of both Wall Street and consumer lending. He has been running the company since late 2005, and is the only CEO still in charge after leading a major bank during the financial crisis.
The 65-page letter (plus a page of footnotes) is Dimon’s longest to date, following last year’s abridged one that arrived less than a week after he returned to work from surgery emergency heart disease. As always, it is broad and covers topics ranging from financial regulation to China, inequality and institutional racism.
Dimon, who built America’s largest and most profitable bank in history, also warned shareholders that disruption of its industry through technology is finally within reach. Shadow lenders are gaining ground. Traditional banks are confined to an increasingly reduced role in the financial system.
“Banks face huge competitive threats – from virtually every angle,” he said. “Fintech and Big Tech are here in a big way! “
The letter expands on predictions Dimon has been offering for years, this time stating that many of those threats have now arrived. FinTech companies are more formidable, offering products that are easy to use, fast and smart, he said. Shadow banks – a group that includes investment funds and online platforms offering finance to businesses and consumers – are also gaining market share.
These groups have outstripped the growth of banks in some ways, often with less regulation. They have also done “a tremendous job of alleviating customer problems” with nifty online platforms, he said.
“While I remain convinced that JPMorgan Chase can grow and generate good returns for its shareholders, the competition will be intense and we need to be faster and more creative,” wrote the CEO. “Acquisitions are in our future, and fintech is one area where some of that money could be used.”
As with previous annual letters, Dimon addressed geopolitical issues. On Brexit, he said uncertain financial regulations coupled with political pressure could lead to a “tipping point many years before it could make sense to move all functions that serve Europe from the UK to continental Europe “.
Dimon mentioned China more than 30 times throughout the letter, predicting that it will likely overtake the United States in the next 20 years as the largest economy and financial market. He praised China’s growth over the past 40 years, but said the country will face serious problems over the next 40, including pollution, corruption and inefficiency.
“China has no direct path to becoming the dominant economic power,” Dimon said. “In the short term, if China and the United States can maintain a healthy strategic and economic relationship, it could greatly benefit both countries as well as the rest of the world. “
He also spoke about the bank’s future real estate needs, expecting it to decline dramatically as remote working survives the pandemic. The bank could require some 60 seats for every 100 employees, as some employees work on a hybrid model, he said. The lender still intends to build its new headquarters in New York, he added.
Despite a warning just two days ago from Senate Minority Leader Mitch McConnell that business leaders should refrain from taking positions on controversial political issues, Dimon has delved into areas such as immigration, health care and education.
“Our problems are neither Democrats nor Republicans – neither are the solutions,” Dimon wrote. “Unfortunately, however, partisan politics impedes the design and implementation of a collaborative policy, especially at the federal level.”
Despite all the brightness of his economic outlook, Dimon found the cause of much darker lamentations.
The pandemic has brought to light deep inequalities and their devastating effects. On issues such as health care and immigration, people have lost confidence in the government’s ability to solve problems, he said.
“Americans know something has gone terribly wrong, and they blame the rulers of this country: the elite, the powerful, the policy makers – in government, in business and in civil society,” he wrote. . “This is very appropriate, because who else should be responsible for it?” “
It fuels populism on the right and left, he said. “But populism is not a policy, and we cannot let it lead to another round of bad planning and bad leadership that will only make our country worse off.”
The CEO even put it in economic terms: he believes that a large-scale “dysfunction” has reduced the rate of US growth by one percentage point. He suggested exploring solutions abroad, citing apprenticeship programs in Germany, healthcare in Singapore and infrastructure in Hong Kong.
Dimon also reiterated a call for a national Marshall Plan, referring to the US effort to help Western Europe recover from World War II, to address the structural challenges behind the country’s racial and economic crises.
“Solving America’s problems is going to take a lot of work. But if we break them down into their building blocks, we will find many viable solutions, ”he said. “With thoughtful analysis, common sense and pragmatism, there is hope.”