The U.S. Federal Reserve has hinted at the possibility of being more aggressive in raising rates this year than previously indicated. On Monday, Jamie Dimon – CEO of JPMorgan Chase & Co (NYSE: JPM) – also got behind the idea of at least four rate hikes in 2022.
It’s possible that inflation is worse than they think, and they raise rates more than people think. I, personally, would be surprised if it’s just four increases.
Dimon’s outlook for economic growth
In his interview with CNBC, Dimon said the U.S. economy is set to see its best yearly growth in decades. His confidence is rooted in the strength of the consumer balance sheet.
We’ll have best growth this year since sometime after the Great Depression. The consumer balance sheet has never been in better shape; they’re spending 25% more today than pre-COVID. Their debt-service ratio is better than it’s been since we’ve been keeping records for fifty years.
Dimon also expects 2023 to be a “pretty good” year for the U.S. economy.
What about the stock market?
Despite his hawkish outlook on the U.S. economy, he expects 2022 to be a challenging year for stock market investors as the central bank moves to tighten its fiscal and monetary policy.
The market is different. 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.
Banks usually do good when rates go up. The KBW Bank Index has already gained 10% for the year, representing historically the best start to the year.
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