An Optimistic Jamie Dimon Sees a 3rd Quarter Recovery

JPM chief points to massive Washington relief efforts as the economy’s savior.

The battered US economy should begin a recovery in the third quarter, according to JPMorgan Chase CEO Jamie Dimon.

This optimistic call rests on the largescale Washington action to counter the economic downturn spawned by the coronavirus-inspired lockdown of much of the US economy. Also, the US consumers’ solid situation going into the downturn should help, he said.

“You could see a fairly rapid recovery,” he told an online conference run by Deutsche Bank. “The government has been pretty responsive; the Federal Reserve has been very responsive. Large companies have huge wherewithal. Hopefully, we’re keeping the small ones alive.”

And there are “pretty good odds” he went on, that the turnaround will start in the third quarter.

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Nonetheless, he acknowledged that the economy, and hence the stock market, might continue to suffer up ahead. “If it does go on for a year, it won’t be very good,” he said. “You can’t prop up the stock market forever.”

Dimon talked up the banking goliath’s prospects, saying that “I think JPMorgan is a very valuable company at these prices.” The CEO recently bought $26 million in JPM shares.

The company now is trading at a thrifty price/earnings (P/E) ratio of just under 11, some 10 percentage points lower than that of the S&P 500. JPM is the leading US bank by assets ($2.74 trillion), followed by Bank of America.

The bank’s shares have taken a pounding since late February, tumbling 42% over March before nudging up amid the unveiling of the federal rescue package. But Dimon’s remarks seemed to cheer the market Tuesday, and investors bid up the stock by almost 8%.

JPM’s earnings sank 69% in the first quarter, to $2.9 billion, partly because it channeled $6.8 billion into reserves to get ready for credit losses from a stumbling economy.

Economists’ projections indicate a steady recovery from the current woes, Dimon declared. In April, the official unemployment rate more than tripled to 14.7% amid massive layoffs. The economists’ forecasts hold that the jobless rate will peak at 18% in the current quarter, then descend to 14% in the third period and end the year at around 10% to 11%.

“This wasn’t the bazooka,” he said of the Federal Reserve’s aggressive maneuvers to bolster the flagging economy by pushing short-term interest rates to zero and buying bundles of bonds.

“The Fed,” he went on, “took out the whole military and applied it. Just announcing these programs reduced spreads in the market,” between corporate bonds and Treasuries.

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