Jamie Dimon, the CEO of JPMorgan Chase, says there is still a chance the U.S. could fall into a recession. He points to federal deficits, ongoing inflation, and the possibility of rising long-term interest rates as factors that could trigger this downturn. Even though the equity markets seem stable, Dimon urges caution. He explains that while the bank’s economists can make forecasts, they cannot predict how severe or long-lasting any economic downturn might be. JPMorgan’s research team has lowered the likelihood of a recession to “below 50 percent,” changing their earlier outlook based on tariff policies.

Recession concerns persist

Michael Feroli, the chief U.S. economist, warns that risks remain “elevated.” This has led many businesses to hesitate on making new investments. Goldman Sachs predicts that the Federal Reserve may start tapering in the first quarter of 2022, with possible interest rate hikes in 2024. Dimon is cautioning about the future, not just because of what we know now, but due to the multiple pressures affecting the economy. He highlights ongoing budget problems and stubbornly high inflation that traditional methods cannot easily address. This indicates a challenging economic environment where financial support may not be as effective and where policy options are limited. When Feroli discusses businesses holding back on investments, he suggests this isn’t just indecision. It’s a sign of deeper concerns influencing decisions across many industries. Companies usually don’t pause like this without significant reasons; such reluctance often comes before changes in overall demand. It isn’t necessarily fear but rather a careful calculation considering current factors like narrower profit margins, unpredictable costs, and uncertainty about labor and interest rates.

Tracking policy signals

Looking at monetary policy, Goldman’s forecasts for rate changes indicate a measured approach rather than an aggressive one, expecting a gradual return to normal as long as things stay stable. However, this forecast can change. If spending slows down faster than anticipated or if financial issues arise unexpectedly, we may see guidance adjusted again. Right now, it’s important to closely monitor treasury yields, especially those in the seven-to-ten-year range, where rate changes typically occur before official statements. Given the current indicators and policymakers’ strategies, we are evaluating the flattening curve against inflation-linked assets as the next test of market sentiment. The focus is no longer just on predicting policy moves but also on understanding how hesitation in capital spending relates to central bank timelines. For our positioning, we are reviewing short-term contracts most sensitive to volatility linked to policy announcements and data releases such as consumer price indices, core spending trends, and unemployment claims. When expectations narrow, market reactions become sharper. Although the likelihood of a recession has decreased to below fifty percent, we don’t see this reduction in risk as a sign that everything is okay. Statements from Feroli and movements from Goldman show some cautious optimism but also recognize a crucial point: the margin for error is currently smaller than it has been in the last two tightening cycles. Create your live VT Markets account and start trading now.

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