Jamie Dimon Just Dropped a Bomb on Wall Street–And It’s Not What You Think

JPMorgan (NYSE:JPM) CEO Jamie Dimon isn’t sugarcoating ithe’s worried. In a candid conversation at the bank’s Global China Summit in Shanghai, Dimon said he can’t rule out a stagflation scenario as the U.S. economy contends with rising deficits, geopolitical friction, and lingering inflation. While the Federal Reserve has held steady on rates so far this year, Dimon supports their wait and see stancebut stressed the outlook remains fragile. The risk of higher unemployment meeting sticky inflation is growing, he warned, and the current calm might not last long.

Trade tensions are making a comeback. A 90-day tariff truce between the U.S. and China is in place, but few expect it to resolve deeper issues. Dimon hopes the two sides push through multiple negotiation rounds, but in the meantime, investors are nervous. JPMorgan’s deal pipeline is slowing as clients hit pauseits investment banking fees are expected to drop by mid-teens percentages year-over-year. On the flip side, market volatility from policy uncertainty has supercharged the bank’s trading division, delivering record revenue in Q1. For now, turbulence is turning into trading profits.

But there’s a bigger shift playing out in the background. Treasury yields just climbed past 5.1%, and demand for long-dated U.S. debt is weakening. Dimon said he isn’t fazed by short-term dollar swings but understands why investors are lightening up on dollar assets. As global fault lines deepen, JPMorgan launched a new Center for Geopolitics to help clients navigate the risksfrom war zones to rising defense budgets. Clients ask us all the time, What should we do about this country?’ Dimon said. His answer? Stay focused, stay flexibleand don’t assume the worst is behind us.

This article first appeared on GuruFocus.