JPMorgan Chase CEO sounds the alarm: Tariffs remain extremely high, the market is overly complacent, and underestimates the risks of inflation and global turmoil

JPMorgan Chase CEO Jamie Dimon warned on Monday during JPMorgan's Investor Day that one should not be complacent in the face of numerous potential risks, especially regarding inflation, credit spreads, and geopolitical issues.

Dimon pointed out that the likelihood of high inflation and "stagflation" is greater than people imagine; asset prices in the U.S. remain elevated, and the current pricing in the bond market does not reflect the risks that an economic downturn may bring.

"Credit is a high-risk business right now, and those who have not experienced a severe economic downturn do not realize what can happen with credit."

Tariffs have not yet caused pain, and the market has become overly complacent

Media reports indicate that the ever-changing tariff policies of the Trump administration have caused significant market volatility, with investors concerned about economic recession and the safety of U.S. assets. However, as Trump continues to boast about progress in negotiations, market sentiment has warmed. Despite Moody's downgrading the U.S. credit rating from the highest level last Friday, the S&P 500 index erased its initial losses on Monday, seemingly without concern from the market.

Dimon stated,

"People feel pretty good because they haven't really felt the impact of tariffs yet; the market dropped 10%, and now it's back up 10%, which I think shows an excessive sense of complacency."

Currently, tariff negotiations between the U.S. and several economies are ongoing, including Japan, South Korea, India, and the European Union. Trump recently reached a trade framework agreement with the UK, and both China and the U.S. announced a consensus on reducing tariffs during high-level economic talks. According to Xinhua News Agency, a spokesperson for the Ministry of Commerce stated that the recent high-level economic talks between China and the U.S. made substantial progress, significantly reducing bilateral tariff levels, with the U.S. canceling a total of 91% of additional tariffs, and China correspondingly canceling 91% of counter-tariffs; the U.S. also suspended the implementation of 24% "reciprocal tariffs," and China similarly suspended 24% of counter-tariffs.

Dimon said that even at the current lower levels, tariffs remain very extreme. He noted that it is still unclear how other countries will respond, and establishing new manufacturing capacity in the U.S. will also take time. He also warned that corporate earnings expectations are likely to be revised downward and reiterated that geopolitical risks remain high.

"We cannot predict the final outcome, but I believe the likelihood of rising inflation and stagflation is somewhat higher than the market expects."

JPMorgan Chase remains in good shape, maintaining interest income expectations

Despite the turbulent situation, Dimon stated that JPMorgan Chase's overall condition is good, maintaining its expectation for net interest income for the year at $94.5 billion. Chief Financial Officer Jeremy Barnum added during the meeting that "the outlook for performance is even slightly better than it was at the time of the first-quarter earnings report."

JPMorgan Chase also reported that the financial condition of consumers and small businesses remains healthy. Although consumer confidence is deteriorating, the bank's head of consumer and community banking, Marianne Lake, pointed out that this sentiment has not yet translated into actual changes in consumer behavior. Notably, JPMorgan Chase increased its loan loss reserves by $973 million in April, far exceeding analysts' expectations of $290 million, indicating that the company has begun to prepare for potential risksAnalysis suggests that market volatility may impact JPMorgan Chase's investment banking business. Troy Rohrbaugh, co-head of commercial and investment banking at JPMorgan Chase, stated that investment banking fees are expected to decline by about a dozen percentage points compared to the same period last year, which is higher than market expectations.

Another co-head, Doug Petno, also mentioned that many clients have "hit the brakes" amid current uncertainties, with Trump's policies and the global trade war suppressing merger and acquisition deals, leading many companies to postpone their IPO plans.

However, JPMorgan Chase expects its market trading business (including equity and fixed income trading) to see revenue growth in the mid to high single-digit percentage range compared to last year. The bank's equity trading team set a historical high in the first quarter, benefiting from the heightened market volatility. Jamie Dimon stated last week that this volatility is expected to continue. Dimon reiterated on Monday:

"There are just too many external risks."