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JPMorgan Chase (JPM) CEO Jamie Dimon says the U.S. is poised to see an economic boom that could “easily run into 2023.”
“I have little doubt that with excess savings, new stimulus savings, huge deficit spending, more QE, a new potential infrastructure bill, a successful vaccine and euphoria around the end of the pandemic, the U.S. economy will likely boom. This boom could easily run into 2023 because all the spending could extend well into 2023,” Dimon wrote in his annual letter to JPMorgan shareholders.
To be sure, the longer-term effects of this boom depend on the “quality, effectiveness and sustainability of the infrastructure and other government investments.”
“I hope there is extraordinary discipline on how all of this money is spent. Spent wisely, it will create more economic opportunity for everyone,” the bank CEO added.
He added that while stock valuations are “quite high,” a “multi-year booming economy could justify their current price.”
“Equity markets look ahead, and they may very well be pricing in not only a booming economy but also the technical factor that lots of the excess liquidity will find its way into stocks. Clearly, there is some froth and speculation in parts of the market, which no one should find surprising. As Captain Louis Renault said in Casablanca, ‘I’m shocked, shocked to find that gambling is going on in here!’”
That said, Dimon said it’s “hard to justify” the price of U.S. debt given the “huge supply” that needs to be absorbed and the “not-unreasonable possibility that an increase in inflation will not be just temporary.”
“We don’t know what the future holds and it is possible that we will have a Goldilocks moment – fast and sustained growth, inflation that moves up gently (but not too much) and interest rates that rise (but not too much). A booming economy makes managing U.S. debt much easier and makes it much easier for the Fed to reverse QE and begin raising rates – because doing so may cause a little market turmoil, but it will not stop a roaring economy,” he wrote.
To be sure, some risks could derail a Goldilocks moment, including new COVID-19 variants and an increase in inflation that forces the Federal Reserve to raise rates quickly.
Elsewhere, Dimon dedicated a lengthy section of his letter to addressing inequality in the U.S. by calling on better wages and opportunities for jobs, among other issues.
Julia La Roche is a correspondent for Yahoo Finance. Follow her on Twitter.