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Dimon says confluence of inflation, Ukraine war may ‘dramatically increase risks ahead’ for U.S.

Jamie Dimon, CEO of JPMorgan Chase speaks to the Economic Club of New York in New York, January 16, 2019.

Carlo Allegri | Reuters

Jamie Dimon, CEO and chairman of the biggest U.S. bank by assets, pointed to a potentially unprecedented combination of risks facing the country in his annual shareholder letter.

Three forces are likely to shape the world over the next several decades: a U.S. economy rebounding from the Covid pandemic; high inflation that will usher in an era of rising rates, and Russia’s invasion of Ukraine and the resulting humanitarian crisis now underway, according to Dimon.

“Each of these three factors mentioned above is unique in its own right: The dramatic stimulus-fueled recovery from the COVID-19 pandemic, the likely need for rapidly raising rates and the required reversal of QE, and the war in Ukraine and the sanctions on Russia,” Dimon wrote.

“They present completely different circumstances than what we’ve experienced in the past – and their confluence may dramatically increase the risks ahead,” he wrote. “While it is possible, and hopeful, that all of these events will have peaceful resolutions, we should prepare for the potential negative outcomes.”

Dimon’s letter, read widely in business circles because of the JPMorgan CEO’s status as his industry’s most prominent spokesman, took a more downcast tone from his missive just last year. While he wrote extensively about challenges facing the country, including economic inequality and political dysfunction, that letter broadcast his belief that the U.S. was in the midst of a boom that could “easily” run into 2023.

Now, however, the outbreak of the biggest European conflict since World War II has changed things, roiling markets, realigning alliances and restructuring global trade patterns, he wrote. That introduces both risks and opportunities for the U.S. and other democracies, according to Dimon.

“The war in Ukraine and the sanctions on Russia, at a minimum, will slow the global economy — and it could easily get worse,” Dimon wrote. That’s because of the uncertainty about how the conflict will conclude and its impact on supply chains, especially for those involving energy supplies.

Dimon added that for JPMorgan, management isn’t worried about its direct exposure to Russia, though the bank could “still lose about $1 billion over time.”

Here are excerpts from Dimon’s letter.

On the war’s economic impact

On Russian sanctions

A ‘wake up call’ for democracies

Implications beyond Russia

On the need to reorder supply chains


Brazil, Canada and Mexico to benefit

On the Fed

‘Very volatile markets’

Fed flexibility

On JPMorgan’s surging spending

“This year, we announced that the expenses related to investments would increase from $11.5 billion to $15 billion. I am going to try to describe the ‘incremental investments’ of $3.5 billion, though I can’t review them all (and for competitive reasons I wouldn’t). But we hope a few examples will give you comfort in our decision-making process.

Some investments have a fairly predictable time to cash flow positive and a good and predictable return on investment (ROI) however you measure it. These investments include branches and bankers, around the world, across all our businesses. They also include certain marketing expenses, which have a known and quantifiable return. This category combined will add $1 billion to our expenses in 2022.

On acquisitions

Global expansion

On JPMorgan’s diversity push

“Despite the pandemic and talent retention challenges, we continue to boost our representation among women and people of color. … More women were promoted to the position of managing director in 2021 than ever before; similarly, a record number of women were promoted to executive director. By year’s end, based on employees that self-identified, women represented 49% of the firm’s total workforce. Overall Hispanic representation was 20%, Asian representation grew to 17% and Black representation increased to 14%.”

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