Jamie Dimon tells shareholders he expects the coronavirus to cause a 'bad recession' and 'financial stress similar to the global financial crisis,' at a minimum (JPM)
Jamie Dimon's annual letter to JPMorgan shareholders was published Monday. In it, the bank's CEO addressed...Jamie Dimon's annual letter to JPMorgan shareholders was published Monday. In it, the bank's CEO addressed the coronavirus pandemic and the impact it could have on the US economy and JPMorgan. The bank has stopped buybacks but has not asked for regulatory relief, Dimon said. Watch JPMorgan trade live on Markets Insider. Read more on Business Insider. In his annual letter to JPMorgan shareholders, published Monday, CEO Jamie Dimon said that while the bank is strong, it won't be untouched by the fallout from the coronavirus pandemic. The pandemic will be damaging to the US economy, Dimon said. "At a minimum, we assume that it will include a bad recession combined with some kind of financial stress similar to the global financial crisis of 2008," he said. "Our bank cannot be immune to the effects of this kind of stress," he added. The US is grappling with the economic consequences of the pandemic, which has roiled global markets and shut down much of the country in an attempt to curb the spread of the disease. Most firms agree that the US is either already in a recession or will soon be in one, marked by massive slowdowns in output and an elevated unemployment rate — in the past two weeks alone, 10 million Americans have filed for unemployment benefits as coronavirus layoffs persist. Read more: 14 Wall Street experts told us the single metric they're each watching to assess coronavirus market fallout — and give their portfolios a leg up In response to the crisis, JPMorgan has stopped buying back its own stock, Dimon said, adding that halting buybacks "was simply a very prudent action." Dimon also said the board would consider suspending the bank's dividend only in "an extremely adverse scenario" that would include a 35% contraction of gross domestic product in the second quarter and an unemployment rate of 14%. "If the Board suspended the dividend, it would be out of extreme prudence and based upon continued uncertainty over what the next few years will bring," Dimon wrote. Still, Dimon said that the bank's capital resources and liquidity remained strong and that JPMorgan is lending or plans to lend an additional $150 billion for client needs. Read more: GOLDMAN SACHS: These 13 cheap stocks are poised for years of better-than-expected profits — and they're must-haves as the coronavirus wipes out earnings in 2020 JPMorgan is "working closely with all levels of government during this crisis" but has not asked for any regulatory relief, Dimon said. But he said that the financial system needed an overhaul when the crisis subsides. Next, there needs to be a solid plan to "carefully" return Americans to work, with precautions that include testing, Dimon said. "The country was not adequately prepared for this pandemic — however, we can and should be more prepared for what comes next," he wrote. "Done right, a disciplined transition would maximize the health of Americans and minimize the time, extent and suffering caused by the economic downturn." Dimon briefly thanked people who wished him well after his emergency heart surgery in March, but he didn't give any further updates on his health. Read more: 'Still too high': Goldman's global equity chief lays out 4 reasons why the stock market will melt down further before it fully captures the coronavirus crisisJoin the conversation about this story » NOW WATCH: A big-money investor in juggernauts like Facebook and Netflix breaks down the '3rd wave' firms that are leading the next round of tech disruption
The research provider TS Lombard predicted on Monday that the S&P 500 would fall below 2,000...The research provider TS Lombard predicted on Monday that the S&P 500 would fall below 2,000 in 2020. That would mark a 20% drop from where the index closed on Friday, and a drop of about 40% from its all-time high reached in February. The firm said it sees more market declines during the coronavirus pandemic because it doesn't believe a V-shaped recovery is possible. TS Lombard also thinks there will be further economic pain in the third quarter after a brutal second quarter. Read more on Business Insider. The stock market has a lot further to fall as the coronavirus pandemic continues, according to analysts at TS Lombard. The research firm on Monday predicted that the S&P 500 would fall below 2,000 in 2020, marking a 20% drop from where the index closed on Friday. Such a decline would bring the index more than 40% below its all-time high of 3,386.15, reached on February 19. TS Lombard lowered its outlook for stocks because it doesn't believe that a "V-shaped" recovery — indicating a swift rebound and strong snap-back momentum — is possible for the US, even after the coronavirus pandemic subsides. "The idea that Americans are simply going to snap back as if what's going on had not happened suggests Wall-Street has 'herd immunity' to common sense," analysts led by Charles Dumas wrote in the note. An early sign of pain to come was in last week's jobs numbers, according to Dumas. On Friday, the March nonfarm-payrolls report showed that the US had lost 701,000 jobs during the month. That the losses were so much deeper than the 100,000-job contraction forecast by economists suggests that damage is more widespread than originally thought, he said. Read more: A stock chief at $7.4 trillion BlackRock shared with us his coronavirus-investing playbook: How to keep money safe, what he's avoiding, and some surprising contrarian bets "There is worse to come, hard though that may be to imagine," Dumas wrote, adding that labor income could fall through the second quarter and then the third. This conflicts with the V-shaped recovery that many economists have predicted. "The world will not just snap back to normal," he wrote. "Leaving aside the 'how' and the 'when' of any return to normal from the current lock-down, people are said going to be the same." Further, Dumas said, at the end of 2019, US households had more assets in the stock market than their own houses — but those assets have since been cut by a third. Small businesses — the "mom and pop" shops that are the backbone of the economy — are also likely to struggle to stay afloat during the coronavirus-induced recession, Dumas said. Read more: 'I was a single mother with 2 small kids:' Here's how Ashley Hamilton flipped a $20,000 waitressing salary into real-estate-investing success and a 10-unit portfolio "A little bit of government help may tide them over, of course — but who would bet that cutbacks in capex do not get triggered sooner than with the usual lag of six months or more?" Dumas wrote, adding that the Philadelphia Federal Reserve's survey of capital expenditure intentions was slumping before the COVID-19 outbreak hit the economy hard. Aside from potential spending cuts, "the first call on any revival of business cash flow will be to pay back whoever has tided them over — not much will be left for dividends even, let alone capex," Dumas said. Overall, Dumas said, the situation is a "stock market in denial, very far from any sign of capitulation." He concluded: "The second leg down of this bear looks as if it will be worse than the first ... and always, the last leg down hurts most." Read more: 14 Wall Street experts told us the single metric they're each watching to assess coronavirus market fallout — and give their portfolios a leg upJoin the conversation about this story » NOW WATCH: A big-money investor in juggernauts like Facebook and Netflix breaks down the '3rd wave' firms that are leading the next round of tech disruption
Chinese officials reportedly cast doubt on any long-term trade deal with Trump — and his impulsive nature is part of the problem | Markets Insider
Chinese officials doubt whether a trade deal can be reached with the Trump administration, Bloomberg reported. ...Chinese officials doubt whether a trade deal can be reached with the Trump administration, Bloomberg reported. Sources told Bloomberg that officials won't "budge" on the trickiest issues of the trade deal — data sharing and communications. The sources also told Bloomberg that concerns over Trump's impulsive nature and a chance he could back out of a deal at any point is limiting on what China is willing to agree to. The German DAX fell 0.9% and the US futures underlying the S&P 500 was down 0.4%. View Business Insider's homepage for more stories. Chinese officials are doubting whether the country can commit to a long term trade deal with Trump, Bloomberg reported. While the two sides have mostly agreed to a "phase one" trade deal, Bloomberg, citing unnamed officials at a policy meeting in Beijing, reported that China isn't willing to budge on data sharing and communications. Trump earlier this month that China had agreed to up its agricultural purchases to $50 billion. "In private conversations with visitors to Beijing and other interlocutors in recent weeks, Chinese officials have warned they won't budge on the thorniest issues," Bloomberg wrote, citing the unnamed sources. "They remain concerned about President Donald Trump's impulsive nature and the risk he may back out of even the limited deal both sides say they want to sign in the coming weeks." Germany's benchmark DAX Index at 9:30 am in London (5:30 am ET) fell 0.9% as the news hit, while the S&P 500 dropped 0.4%. "Some officials have relayed low expectations that future negotiations could result in anything meaningful — unless the US is willing to roll back more of the tariffs. In some cases, they've urged American visitors to carry that very message back to Washington," Bloomberg wrote, citing the people. Bloomberg also added that though China wants talks to continue, it is in no rush to remove tariffs immediately — though for talks to progress the added tariffs due to go into effect December 15 must be removed. Earlier on Thursday, China released its manufacturing figures for October, which came in at the lowest level since February, with the fall in export orders to blame. Trade talks also looked to be in doubt on the news Wednesday that the Chilean President Sebastián Piñera called off the APEC summit where Trump and Xi were due to meet next month for face-to-face talks. Join the conversation about this story » NOW WATCH: A big-money investor in juggernauts like Facebook and Netflix breaks down the '3rd wave' firms that are leading the next round of tech disruption
Both President Trump and presidential hopeful Senator Elizabeth Warren have floated the idea of weakening the...Both President Trump and presidential hopeful Senator Elizabeth Warren have floated the idea of weakening the dollar to help sell US exports. This is a very stupid, dangerous idea. Weakening the dollar would scare the world away from US assets, hurt already weakening confidence in the US government, and potentially start a race to the bottom currency war with China that no one will win. Visit Business Insider's homepage for more stories. President Donald Trump and Democratic presidential hopeful Sen. Elizabeth Warren have the same idea about the dollar, and it is very bad. Both Trump and Warren would like to see the United States intervene in global currency markets to weaken the US dollar. Both say this would help US workers by making Americans exports cheaper, as foreign currencies would be able to buy more dollar denominated goods for less. For Trump, this move would help to accomplish one of his most precious but pointless goals — lowering the US trade deficit. According to the Wall Street Journal, Trump has floated the idea to his advisers who have so far ruled it out. Warren expressed her desire to weaken the dollar in her US Jobs plan released back in June. She — like economist Robert E. Scott, who wrote in support of this proposal in the New York Times — believes that the strong dollar has made US exports too expensive and thus uncompetitive. That's why you see factories moving overseas, so that they can produce cheaper goods for foreign buyers. Scott argues other countries were able to entice blue collar jobs away from the US thanks to the strength of the dollar, and then they pressed this advantage by manipulating their currencies lower. The economist also complains that the strength of the dollar has attracted investors who then buy the currency. This flood of private and foreign capital to US dollars and assets, he calls "currency misalignment." Others call this a market. One of the reasons an investor would buy the US dollar over, say, the Thai baht, is because it's a global reserve currency — central banks hold it. They hold it because it's trustworthy — so far we haven't had a tin pot dictator run around manipulating its value. That trust is ultimately what makes the dollar so liquid, which investors love. In this way, the dollar's stability is important for the entire world, not just the US. "Foreigners buy US stocks and bonds (which are denominated in US dollars, of course) because they believe these financial assets (and the currency in which they are denominated) are not going to be randomly manipulated by some impulsive and unprofessional government," Carnegie Mellon economist Lee Branstetter told Business Insider via email. "If the US sought to systematically manipulate the value of its currency, that could negatively impact the home currency returns received by foreigners investing in our assets. A cheapening dollar makes U.S. stocks a less attractive investment. Foreigners would think twice about investing in our assets if any capital inflow that drove the dollar up was met with an attempt by the US government to push the dollar back down." A weaker dollar would also cause a slew of other headaches from making it more difficult to pay down the national debt to increasing mortgage rates. On top of all of this is the question of how we'd move to dollar lower. One way is to just lower interest rates, which the Federal Reserve has been doing. That doesn't seem to be working fast enough for President Trump, though, which means he may use the the 1934 Gold Reserve Act to intervene in the market by selling dollars. A lot of dollars. "Since we print our dollars, we could, in principle, print so freaking many that their price goes down," Branstetter continued. "If implemented, it could literally cost us tens of trillions of dollars in lost wealth." The Xi factor And right now, in the middle of a trade war with China and with central banks working feverishly to ward off deflation, there are even more pressing complications that would come with weakening the dollar. Namely, kicking off a race to the bottom. Thanks in some part to Trump's trade war the Chinese economy is weakening. For the first time in 3 years producer prices fell in August. That means manufacturing profits will fall. At the same time, the country is going through a pork shortage that is pushing consumer prices up. Targeted government stimulus measures haven't been doing enough to spur growth. It's a toxic mix. A weaker economy means a weaker Chinese yuan, which has a peg that is set daily by the People's Bank of China (PBOC). And as the economy slows prices in China are falling. All of this is acting as a deflationary force that China can export to the rest of the world. We've worried about this before. Back in the beginning of 2016 — as all of the world's elites gathered at the World Economic Forum in Davos to worry about their money — China's economy was puking. Money was leaving the country hand over fist and this was pushing the yuan down. "I think the Chinese situation with the currency is very important. Very important," Ray Dalio, the billionaire founder of the world's biggest hedge fund, said at the time. "If there is significant currency weakness for the Yuan that will mean more imported deflation and it will make things more difficult." Because the dollar is in such high demand as a reserve currency, to move it down one would have to make a massive intervention in markets. Even then, though, economists think that it could very well only less ubiquitous, emerging market currencies. China — currently in the throes of a swiftly weakening economy — could just respond to a weaker dollar by setting its peg lower. This would then kick off a race to the bottom with the US and China weakening their respective currencies back and forth. Now of course there are limits to what China would do. Set the peg too weak and money will start to leave China like it did back in 2016. That kind of capital flight could set the yuan heading down too rapidly for the PBOC's taste. But on the other hand China needs to sell exports. So if the US starts a race, China may want to finish it.SEE ALSO: Everyone has forgotten about why Donald Trump can't win a trade war with China Join the conversation about this story » NOW WATCH: Amazon is reportedly seeking a new space in New York City. Here's why the giant canceled its HQ2 plans 5 months ago.