New York (AFP) – JPMorgan Chase CEO Jamie Dimon said Friday that US Treasury bonds remained a safe place in an unpredictable world as he warned of “considerable turbulence” facing the economy. The big US bank reported higher quarterly profits in results overshadowed by upheaval in financial markets as equity markets have churned amid gyrations in the US Treasury market and a falling US dollar.
US bond yields were up again early Friday, indicating weaker demand for US Treasuries, long considered a safe haven asset. Dimon rejected the notion that US Treasuries were no longer a haven, but acknowledged an impact from recent market volatility. “It does change the nature a little bit from the certainty point of view,” Dimon said in a conference call with reporters. “But it doesn’t take away the fact that if you’re going to invest your money in something, America is still a pretty, pretty good place in this turbulent world.”
The volatility in the Treasury market has been accompanied by a drop in the US dollar that analysts attribute to a weakening US economic outlook and to questions about President Trump’s fluctuating trade policy. Dimon’s comments came as the giant US bank reported first-quarter profits of $14.6 billion, up nine percent from the year-ago level in results that topped analyst expectations. Revenues were $45.3 billion, up eight percent.
The lender had a steady performance across businesses, with the biggest profits coming from its corporate and investment bank. Equity markets revenues soared 48 percent as the bank pointed to an especially strong performance in derivatives “amid elevated levels of volatility,” JPMorgan said in a press release. The bank also scored higher revenues in trades connected to interest rates and commodities.
Bank officials said they had not seen signs of a steep change in consumer behavior due to tariffs. But they said there had been some move by consumers to “pull forward” spending on some items ahead of tariffs.
– Becoming more cautious –
Dimon reported hearing “anecdotal” evidence that companies are becoming more reticent about deals. Dimon is hearing that people “are being very cautious about investment,” he said. “What you see in the actual data coming forward, I don’t know.” Dimon in recent days has warned of an increased risk of recession due to Trump’s aggressive trade policy, with China responding to Trump’s latest tariff hike with an escalation of its own.
In an earnings press release, Dimon described the economy as “facing considerable turbulence (including geopolitics), with the potential positives of tax reform and deregulation and the potential negatives of tariffs and ‘trade wars,’ ongoing sticky inflation, high fiscal deficits and still rather high asset prices and volatility.” Dimon said.
JPMorgan set aside additional reserves of $973 million in case of loan defaults, a sign that it is preparing for a potentially weaker economy. Overall provisions rose 75 percent from the year-ago level. The additional reserves reflect that JPMorgan has adjusted its economic scenario “to add a little bit of downside risk and increase the uncertainty,” said Chief Financial Officer Jeremy Barnum. Shares jumped 3.2 percent in early trading.
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