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As the Fed interest rates start to surge, banking stocks have already started the party on Wall Street. However, despite strong growth projections, Dimon expects some volatility ahead this year on Wall Street.
JPMorgan Chase, America’s largest banking institution, remains bullish on the economic outlook for America over the next decade. JPMorgan chief Jamie Dimon recently spoke to CNBC’s Bertha Coombs during the 40th Annual JPMorgan Healthcare Conference.
JPMorgan CEO Jamie Dimon Speaks on the Situation on the Market
He said that the US is headed for the best economic growth in decades. Besides, he also expects 2022 to be a good year for economic growth. Dimon further added:
“We’re going to have the best growth we’ve ever had this year, I think since maybe sometime after the Great Depression. Next year will be pretty good too.”
JPMorgan CEO Jamie Dimon shared his reasons for staying bullish on America. He said that his confidence stems from the robust balance sheet of the American consumer. “The consumer balance sheet has never been in better shape; they’re spending 25% more today than pre-Covid,” Dimon said. “Their debt-service ratio is better than it’s been since we’ve been keeping records for 50 years.”
Expect Four or More Fed Rate Hikes in 2022
Well, as we know, the Federal Reserve has started initiating measures of quantitative tightening (QT). This is because of the higher-than-expected inflation in recent times. The Fed has already hinted at three-rate hikes coming ahead in 2022 to control inflation.
Wall Street banking giant Goldman Sachs has predicted that there could be four rate hikes in 2022. Dimon said that there’s every possibility that there could be four or even more rate hikes this year. However, he expects the growth to follow despite the rate hikes.
“It’s possible that inflation is worse than they think and they raise rates more than people think,” Dimon said. “I personally would be surprised if it’s just four increases.”
Interest rate hikes and the rising rate environments usually tend to benefit the banks. This is because as the rates increase, their lending margin expands. Just as the rates have climbed, the banking stocks have already started the party on Wall Street.
Last week, the KBW Bank Index jumped a staggering 10%. Dimon said that although the economic growth looks strong, investors might have a bumpy ride ahead this year as the Federal Reserve goes to work.
“The market is different,” Dimon said. “We’re kind of expecting that the market will have a lot of volatility this year as rates go up and people kind of redo projections. If we’re lucky, the Fed can slow things down and we’ll have what they call a `soft landing’”.