Some top names on Wall Street think a US recession is now likely, if not inevitable. But they have big worries in their minds.
JPMorgan Chase ( JPM ) CEO Jamie Dimon said Tuesday he is more concerned about global geopolitics than slowing economic growth in the United States.
“There’s a lot of stuff on the horizon that is bad and could — not necessarily — but could put the U.S. in a recession,” he said on a panel at the Future Investment Initiative conference in Riyadh, Saudi Arabia.
“It’s not the most important thing that we think about. We will manage through it. I’m more worried about the geopolitics of the world today,” he told CNN’s Richard Quest, who moderated the discussion between some of America’s most influential financiers. at the event, which is also known as “Davos in the Desert.”
Dimon said he was referring to Russia’s war in Ukraine and strained relations between the United States and China, where leader Xi Jinping has recently asserted his grip on power and sidelined officials who have pushed for reforms and opened up the world’s second-largest economy.
“The relationship of the Western world will make me more concerned than whether there will be a mild or rather severe recession. [in the United States],” he said added.
The breakdown of relations – and the negative consequences for everything from national security to energy supply and food security – was a persistent theme during the discussion. CEO Dimon and Blackstone Group (BX) Stephen Schwarzman pointed to the isolating effects of the pandemic, which they said affected communication between people and the ability to learn from one another.
“We got ourselves into an increasingly deglobalized situation,” Schwarzman said.
Ray Dalio, the billionaire founder of hedge fund Bridgewater, said there is an “existential risk of international war.” What is needed is a “strong political center” that is “stronger than the extremes,” he added.
According to Dimon, at the root of many of these problems is the lack of American leadership.
“If you don’t have strong American leadership – not bad American leadership, not ‘our way or the highway’ – just something that comes together for the Western world, you will have chaos like you see in Ukraine,” he said. .
Dimon said he believes relations between the United States and Saudi Arabia will remain strong, despite rising tensions following OPEC+’s decision to cut oil production earlier this month.
“Saudi Arabia and the United States have been allies for 75 years. I can’t imagine an ally that agrees on everything and doesn’t have a problem. They will get through it… and remain allies in the future,” he said.
Commenting on the likelihood of a recession in the United States, Dimon said that while the US business and consumer spending remains strong for now, America will probably come out of “excess money” around the middle of next year.
David Solomon, CEO of Goldman Sachs (GS), speaking on the same panel, also thinks a US recession is likely.
“There is no question that economic conditions are going to tighten meaningfully from here,” Solomon said, referring to interest rate hikes by the Federal Reserve. “If you find yourself in a situation where inflation is installed, it is very difficult to get out of it without economic slowdown,” he added, commenting that Europe is already in recession.
Schwarzman also highlighted rising interest rates and “problems in relations between countries” as the main challenges facing businesses.
To that list he added social media.
“One of the things we almost don’t realize is how difficult it is for government to function in the world of social media,” Schwarzman said. Initiatives to “make the world a better place” were taken away by a “shouting minority” of people trying to do something for the benefit of the world, he added.
Dimon said that social media users should be authenticated in the same way that verification is required to access banking systems, which will help “get rid of bots.”
Social media users should also be given a “menu of choice” for algorithms that explain how each one works. “It should give you a choice as opposed to manipulating you,” he added.
When asked what kind of algorithm he would choose, Dimon replied: “I don’t see any of that.”
Despite the weakness of social media or political and economic divisions, The panelists were optimistic about the power of innovation to improve the world.
“We can sit here and talk about all the things that drive growth … but the innovation economy is alive and well,” Solomon said.
Technological progress on various fronts – from quantum computing, to artificial intelligence and progress in education and healthcare – is “very, very strong” and “has the ability to lift us up and move us forward,” he added.
Saudi Arabia’s Future Investment Initiative, which runs until October 27, began in 2017 under Crown Prince Mohammed bin Salman’s “Vision 2030”, a plan to attract international investment and wean the economy off oil.