The S&P 500 is up 14% over the previous 12 months; the Magnificent 7 is up close to 17%. Bull spirits are driving excessive, billions upon billions of {dollars} are being funnelled into synthetic intelligence, which the overwhelming majority of Wall Avenue agrees will show transformative for progress and effectivity. What may presumably go flawed?
That’s the query J.P. Morgan Chase CEO Jamie Dimon is asking himself, and the reply he’s provide you with is “plenty.”
The Wall Avenue veteran and chief of America’s largest financial institution is well-known for his pragmatism: Even throughout comparatively wholesome financial cycles, Dimon ensures JPM’s analysts are always stress-testing to make sure the financial institution would survive any market blip or financial downturn. With a lot being guess on AI (hyperscaler capex this 12 months is predicted to be roughly $646 billion, or about 2% of U.S. GDP), Dimon’s hackles raised are even larger.
Talking throughout the financial institution’s firm replace occasion yesterday afternoon, the 69-year-old acknowledged it’s straightforward to get caught up in bull spirits. However he additionally reiterated the long run, macroeconomic headwinds he believes will inevitably result in a flip within the cycle. On calls that rising tides will elevate all boats available in the market, Dimon shared: “I’m not quite that optimistic about the year.”
“We know … that there are all these tailwinds. The One Big Beautiful Bill, bank deregulation, other deregulation, animal spirits, faster permitting … I think it’s all going to drive growth this year,” he started. “It may have a slight inflationary effect.”
However turning to headwinds, Dimon cited geopolitics, international deficits, commerce points, the remilitarization of the world. “Those are longer term things that may effect the economy, but they could be harsh,” Dimon added. “If you read history books, there are a lot of examples where you could get surprised.”
These acquainted with Dimon’s financial outlook gained’t be stunned to listen to him discussing geopolitics and international deficits as key issues. The Wall Avenue large constructed a “lean and mean” geopolitics arm final 12 months to observe the shifting world order, after Dimon stated rising tensions are the largest risk to the world economic system. Likewise, the banker stated earlier this 12 months that the U.S.’s fiscal trajectory is unsustainable and that forces “may crash” in the future consequently.
“We don’t run the company hoping for good times, we don’t run the company just thinking there are bad times. We run the company [with] a full range of possible outcomes, so that regardless of the outcome we can serve our clients day in and day out,” he added.
“There will be a cycle one day, I don’t know when there will be a cycle, I don’t know what confluence of events will cause that cycle,” Dimon continued. “My anxiety is high over it. I’m not assuaged by the fact that asset prices are high, in fact I think that adds to the risk.”
It’s an unpopular take. Tech firms are banking on an optimistic story the place AI bets repay. In reality, Dimon acknowledged it’s straightforward to really feel “stupid” to query the potential returns when the going is so good, however he added: “And then I think about all the factors taking place, I like to take a deep breath and say ‘watch out.’”
The succession query
Whereas a query about Dimon’s financial outlook is normally the preferred, succession questions typically come second.
The Wall Avenue titan stunned buyers in Might 2024 when he advised shareholders the timetable for his departure from the financial institution is “not five years anymore,” in response to a query about how lengthy he deliberate to stay CEO. Dimon had lengthy joked that his retirement was 5 years away, regardless of when he was requested.
Yesterday, Dimon offered an replace: “I was told to say this very specifically,” he started—prompting laughter from the viewers. “I’m here for a few years as CEO, and maybe few after that as executive chairman.”
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