Investors should place more stock on Dimon concerns amid US highs

Indeed, Wall Street’s latest record high is somewhat surprising given the continued risk of stagflation in the United States and the Federal Reserve’s uncertainty about whether it will cut rates this year.

Many Fed officials have recently expressed hawkish views that appear to have been overlooked by the market.

As JPMorgan Chase CEO Jamie Dimon said, high price pressures are still impacting the U.S. economy and will likely keep interest rates high for longer than the market expects, and even longer than many investors expect.

In an interview with Bloomberg, Dimon said the reasons for continued price pressure in the US include the green economy, remilitarization, infrastructure spending and huge budget deficits.

He also worries that geopolitics will be a decisive factor in determining the economic direction next year.

As such, Dimon believes that “optimistic talk” is driving US stocks higher, but the chances of a soft landing for the US economy are actually only half of what the market expects.

In fact, he thinks American investors are unprepared for stagflation.

Dimon, as we know, is not a typical stock market guru or regular analyst from a big bank.

As CEO of JPMorgan Chase, his capabilities must be excellent.

Although he caused JPMorgan to lose more than US$2 billion (HK$15.6 billion) in 2012, he helped the bank post profits and new highs a year later.

More importantly, he guided JPMorgan through the 2008 financial crisis unscathed, demonstrating his ability to foresee crises.

Therefore, his concerns about stagflation in the US are certainly worth considering.

More importantly, many Fed officials share his views.

Among them, Michelle Bowman, Fed governor and voting member of the Federal Open Market Committee, reiterated that she would support the Fed resuming rate hikes if inflation slows down or, worse, rises again.

She also pointed out that while current interest rate levels are suppressing the economy, and the premise is still that inflation will continue to fall, she remains cautious and expects inflation to remain high for some time to come.

Moreover, many analysts believe that the minutes of the Fed’s May meeting, to be released this week, could reflect a stance that will be even more hawkish than Chairman Jerome Powell’s comments after the meetings indicate.

If this is true, the recent recovery in US stocks, fueled by expectations of rate cuts, and the atmosphere of new highs in the US stock market could mean a quick turnaround, which appears to be an issue that many investors have not taken into account. .

Another point worth mentioning is that if all investors believe that inflationary pressures can be gradually eliminated, or risk aversion decreases, why would the gold price continue to reach new highs?

This reflects the belief of many investors that inflation will continue and that even geopolitical or financial risks will continue to increase.

Therefore, investors should be more cautious about the recent new highs in US stocks, rather than assuming that the adjustment in US stocks has ended.

Andrew Wong is chairman and

CEO of Anli Holdings