JPMorgan’s Jamie Dimon Predicts ‘Crack in the Bond Market,’ Citing U.S. Fiscal Mess
While China is a potential adversary, the bank executive said, America must ‘get our own act together’
JPMorgan JPM -0.14%decrease; red down pointing triangle Chase Chief Executive Jamie Dimon delivered a dire warning for the markets, predicting a crisis unless the U.S. takes steps to address its spiraling national debt.
“You are going to see a crack in the bond market, OK?” Dimon said during an interview at the Reagan National Economic Forum in California. “It is going to happen.”
Bond markets have been rattled by the prospect that the already wobbly fiscal situation in the U.S. will worsen, should tax legislation backed by President Trump become law. A House-passed measure would increase projected budget deficits by some $2.7 trillion over a decade, adding to a national debt that already stands at more than $36 trillion.
That fiscal package spooked bond traders, leading to a selloff in benchmark 10-year Treasurys that sent yields up nearly a quarter point to 4.418% this month. Moody’s Ratings stripped the U.S. of its triple-A credit rating, citing the government’s towering pile of debt. And tepid demand for Treasurys at a May 21 auction added to concerns.
Dimon noted that Covid had left the debt markets in disarray in early 2020, until the government responded with several actions that normalized trading and stimulated the economy. But “they massively overdid” it in the years that followed, he said.
Regulations imposed on banks after the 2008-09 financial crisis have left them with less flexibility to hold bonds and other securities on their balance sheets. That makes it difficult for financial firms to step in between sellers and buyers when credit markets freeze up, Dimon said.
Treasury Secretary Scott Bessent and other banking regulators have pledged to loosen capital requirements to let banks hold more Treasurys.
Without substantial changes, the U.S. is headed for a reckoning, Dimon said. “And I tell this to my regulators…it’s going to happen, and you’re going to panic,” he said. “I just don’t know if it’s going to be a crisis in six months or six years.”
Dimon, one of Wall Street’s longest-serving chiefs, has a long record of delivering sobering prognoses on the health of the economy and the financial markets. Earlier this month, he said stock investors weren’t adequately accounting for the impact of Trump’s tariffs, given the market’s rebound from its lows at the start of the trade war. “It’s an extraordinary amount of complacency,” he said.
A potential debt-market crisis isn’t the only scenario that has Dimon worried. He also believes that if America’s economic and military might erodes, the dollar’s pre-eminent status is at risk.
“If we are not the pre-eminent military and the pre-eminent economy in 40 years, we will not be the reserve currency,” he said. “People tell me we are enormously resilient. I agree with that. I think this time is different. This time we have to get our act together and do it very quickly.”
Dimon acknowledged that China, the primary target of Trump’s trade war, is a “potential adversary.”
“What I really worry about is us,” he said. “Can we get our own act together—our own values, our own capabilities, our own management?”