At a banking conference Dimon said, “Right now, it’s kind of sunny, things are doing fine... The hurricane is right out there down the road coming our way. We just don’t know if it’s a minor one or Superstorm Sandy.”
Dimon urged the Fed to hike interest rates and begin quantitative tightening — letting the central bank’s $900 trillion bond portfolio begin maturing without reinvesting in bonds. Yesterday was the first day that quantitative tightening was slated to begin ramping up to $95 billion in bond sales each month, according to the Federal Reserve.
Several major central banks around the globe are raising interest rates to fight inflation, and are also preparing to pull back from financial markets in a global quantitative tightening which is expected to restrict credit and add stress to an already slowing world economy.
However, the exact outcome of these measures remains uncertain. According to Dimon, “we’ve never had QT like this, so you’re looking at something you could be writing history books on for 50 years.”
"Investors should heed Dimon’s warnings given that not only does he run one of the world's largest banks, but he has historically been more bullish on the strength and resilience of the US economy. His change of tune is noteworthy," stated Caleb Silver, Editor-in-Chief of Investopedia.