Recession coming soon? Here’s what CEO of biggest US bank said about its possibility in US, China and India

In a recent interview with The Times of India, Jamie Dimon, CEO of JP Morgan, addressed the complexities of the global economy, noting that while inflation and recession risks are persistent, the U.S. and Indian economies are demonstrating resilience. “There’s a lot of noise about recession – the US, Europe and a slowing China,” Dimon said.

He pointed out that, while China’s economy has slowed, India is performing well alongside the U.S., which he described as having held up better than expected.

Dimon elaborated on the daily economic activities that drive growth, stating, “For example, JP Morgan moves $10 trillion a day. Investors are making decisions, every single day. People are going to work, sending kids to schools and buying food – that’s what drives the economies.” This illustrates his view that everyday economic actions are crucial to understanding larger economic trends.

Geopolitical Factors as Key Influencers

Dimon emphasized that geopolitical issues, rather than just financial markets, will largely dictate the future trajectory of the global economy. He stated, “Geopolitics is far more important for mankind than interest rates in Japan and the United States.”

He expressed concerns about escalating conflicts in Ukraine and the Middle East, particularly the dangers posed by missile attacks and military actions, saying, “Ukraine has gotten worse. The missiles and the bombardment are getting worse.”

He acknowledged the implications of the Federal Reserve’s recent interest rate cuts. “It looks that way, but I’m a little cautious in that,” he noted regarding the prospects for a soft landing. Dimon believes the Fed made the right decision to reduce rates, citing a stable underlying economy as a reason for cautious optimism.Also Read: Geopolitics is most important; Ukraine bombardment, Houthi attacks pose significant dangers, says JPMorgan CEO Jamie Dimon

Capital Flows and Economic Normalization

When discussing the divergent monetary policies between the U.S. and Japan, Dimon explained that this signifies a normalization in the global financial landscape. He stated, “It’s just a normalization. Japan is still kind of zero, and they’re moving up a little bit.” He stressed that capital flows will depend more on economic growth than solely on interest rates, saying, “The real thing that’s gonna drive flows will be growth in the economies, and not just the interest rate.”

On the topic of the yen carry trade, Dimon noted that many investors have unwound their positions. He cautioned, however, that geopolitical risks pose a significant concern for global markets, stating, “That dwarfs all other things.”

India’s Ambitious Growth Potential

Shifting focus to India, Dimon praised the country’s advancements, attributing its success to effective reforms and infrastructure improvements. “I think you guys here have done a fabulous job at that. Your Aadhaar system, the banking accounts, reforming the GST, building national infrastructure, reducing regulations,” he stated. Dimon expressed confidence in India’s ambition to become a $7 trillion economy, saying, “These things help the country and help lower-income folks, in addition to the wealthy.”

Reflecting on JP Morgan’s involvement in India, Dimon remarked on the growth of the bank’s research efforts, noting, “Today, we do research on close to 140 companies which helps educate the world about Indian companies.” With nearly 55,000 employees supporting various global operations, he underscored the bank’s commitment to enhancing India’s financial markets and technology landscape.

Also Read: ‘Under a strong leadership, India can hit $7-trillion target by 2030’, says JPMorgan CEO Jamie Dimon

Political Landscape and Economic Stability

Discussing the current political climate in India, Dimon acknowledged the government’s reduced majority but maintained that it should not significantly affect economic prospects. “Not really. The government, democracy is that way, right? So any democracy you operate in, you have to understand it may move around a little bit,” he noted.

In regards to the U.S. economy, Dimon reiterated his previous warnings about the possibility of a recession, stating, “I do not take the chances of a recession in the US off the table.” He believes the odds of a soft landing are around 35% to 40%, but added, “There’s a lot of uncertainty out there.” He pointed to various factors, including geopolitical events and economic policies, that contribute to market volatility.

As the global economy continues to navigate ongoing challenges, Dimon’s insights shed light on the interplay between geopolitical dynamics and economic growth. His positive outlook on India’s potential, paired with a realistic assessment of risks facing economies worldwide, highlights the complexities of today’s financial landscape. Dimon’s emphasis on the importance of reforms and strong leadership illustrates a path forward for India as it aspires to achieve its ambitious economic goals.

(With inputs from TOI)