No. of Recommendations: 0
Dimon is definitely in the "higher for longer" camp on interest rates:
"We are prepared for potentially higher interest rates, and we may have higher inflation for longer.
If we have higher inflation for longer, the Fed may be forced to increase rates higher than people expect despite the recent bank crisis. Also, QT may have ongoing impacts that might, over time, be another force, pushing longer-term rates higher than currently envisioned. This may occur even if we have a mild ' or not-so-mild ' recession, as we saw in the 1970s and 1980s.
We have always looked at the 'fat tails' of higher interest rates, particularly on our own company. We were premature in thinking about the possibility of interest rates going to 5%, 6% or 7% -- which still might not happen, but we always want to be protected against this outcome. For example, we have spoken about stockpiling cash, not investing in sovereign debt when rates were low and being willing to forgo income to protect against rising rates. Rest assured, our company can handle significantly higher interest rates no matter how anyone analyzes capital.
Higher interest rates will obviously have an important impact, not just for banks but for some of those who borrow on a floating rate or those who have to refinance in a higher rate environment. If this tide goes out, you should assume that it will expose additional weaknesses in the economy. However, our company is prepared ' not only for higher rates but for a potential recession that could arise and related credit losses. That preparation includes analyzing all of our clients (in particular our leveraged lending, real estate and other clients) for what the impact of higher rates may mean for them. We believe the risks within our own portfolio are manageable. And we try to analyze the impact of these factors on companies and industries away from us. For example, we do expect that some types of real estate in certain locations may come under pressure.
Who else do we know that has been hoarding cash?
