Jamie Dimon, CEO of JPMorgan Chase, warns that the risk of a U.S. recession is still present. He cites factors such as federal deficits, persistent inflation, and potential for higher long-term interest rates as possible triggers for economic contraction.

Despite equity markets appearing stable, Dimon emphasises caution, noting that the bank’s economists provide precise forecasts but cannot predict the magnitude or duration of a potential downturn. According to JPMorgan’s research team, the recession probability is now “below 50 percent,” having been adjusted from earlier expectations of a slump following tariff policies.

Recession concerns persist

Chief U.S. economist Michael Feroli points out that risks remain “elevated,” causing businesses to pause on new investments amid the uncertainty. Goldman Sachs has forecasted that the Federal Reserve’s tapering may happen in the first quarter of 2022, with a rate hike potentially occurring in 2024.

What Dimon is alluding to is a cautionary stance on where things may head next—not simply because of what we already know, but because of the compounding nature of various pressures at once. The argument he makes draws attention to structural budgetary issues and above-target inflation that has proven resistant to the usual levers. Taken together, this suggests an economic environment where stimulus is less likely to play a helpful role, and where policy tools have narrowing margins for manoeuvre.

When Feroli brings forward the idea that firms are holding back on fresh investment, the implication isn’t mere hesitation. It is reflective of a broader concern trickling through decision-making channels across multiple sectors. Businesses don’t typically pause like this without having hard reasons, and that kind of reluctance often precedes a shift in broader demand patterns. It’s not fear-driven necessarily, but calculative in light of what’s in front of us: smaller margins, less predictable input costs, and short visibility around labour and rates.

Tracking policy signals

Looking at monetary policy signals, Goldman’s projections on rate adjustments suggest not an aggressive stance, but a well-telegraphed move towards normalisation that assumes things stay on a stabilising path. That projection isn’t set in stone. If consumption trends moderate quicker than expected, or if fiscal tensions ripple into surprise liquidity shortages, we might find forward guidance shifting yet again. From our viewpoint, what matters now is closely tracking treasury yields with duration sensitivity, especially out along the seven-to-ten-year horizon where rate movement tends to creep in before public commentary.

Given the indicators and pace of policymaker positioning, we’re weighing the flattening curve against inflation-linked assets as the next test of market sentiment. It isn’t only about predicting policy steps anymore—it’s about understanding how hesitation in capital expenditure sits beside central bank timelines.

For positioning, we’re scrutinising short-term contracts most susceptible to shifts in volatility linked to policy announcements that come with data expressions—consumer price indices, core spending trends, and jobless claims, specifically. When expectations become narrow, reactions become sharper.

While probability has tapered below fifty percent, we’re not taking the reduction in risk metrics as an all-clear. Wordings by Feroli and movement on the Goldman side both carry the weight of measured optimism, but also an acknowledgement: right now, the room for error is smaller than we’ve seen over the past two tightening cycles.

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