Jamie Dimon offered this optimistic outlook in his annual letter to the bank’s shareholders, in which he stated that the high savings rate, the stimulus programs, the potential infrastructure package and the “euphoria over the end of the pandemic” would likely cause the American economy to take the stride.
“It is possible that we have a Goldilocks moment – rapid growth, gently rising inflation (but not too much) and rising interest rates (but not too high),” said the most important financier on Wall Street, adding that sustained spending may nurture a period of expansion that would extend over years.
Both consumers and businesses appear to be in excellent financial health as the country begins to emerge from the health crisis, said Dimon, who runs the largest American bank on the asset side.
Even before the approval of President Joe Biden’s $ 1.9 trillion stimulus package last month, JPMorgan estimated that its individual customers would have a savings surplus of around $ 2 trillion. The big companies, meanwhile, boast comfortable cash reserves of $ 3 trillion on their balance sheets.
In addition, the expansive actions of monetary authorities around the world are expected to “have a cumulative global effect,” said Dimon.
If a boom like the one he describes emerges, generous stock market valuations would be justified, even though the oversupply of US government debt securities may make it difficult to sustain the price of United States Treasuries, he he added.
Dimon has repeatedly defended, in his 34,000-word message, higher government spending to address some of the country’s most serious issues, such as aging infrastructure, unaffordable health services and growing economic inequality.
“If the money is spent wisely, it will create more economic opportunities for everyone,” he declared, recognizing that sometimes too much money got stuck in bureaucratic and inefficient programs.
His comments came as the Biden government turned its attention to approving a $ 2 trillion infrastructure plan, in addition to the nearly $ 5.8 trillion in stimulus measures adopted in the United States during the pandemic.
Supporters of the infrastructure proposal say it represents an investment that has been postponed for too long, and its critics say that the additional spending, in addition to the expensive stimulus packages, created a risk of overheating the economy and launching the United States into a recession.
Although the fairytale scenario was likely, Dimon assured investors that JPMorgan was also prepared for the possibility of runaway inflation or a new wave of lockdowns.
“And, of course, being who we are, although our hope is that the scenario Goldilocks will be confirmed – and we believe there is a possibility that this will happen – we will anticipate and be prepared for two other negative scenarios,” he said.
Although Dimon did not directly mention the most controversial aspect of the United States President’s infrastructure plan – an increase in the tax rate paid by companies from 21% to 28%, in order to cover the cost of the measures -, he maintained that the country needs a competitive tax structure in international terms.
“Even if the capital is distributed in dividends or repurchases of shares, it will simply be destined for better and higher use – it is a completely normal capital reallocation,” he said.
Originally translated from English by Paulo Migliacci
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