A booming job market, softening inflation, robust growth — the economy has performed well by just any measure but the chief executive of the nation’s largest bank is worried the U.S. still remains on the brink of a downturn.

Jamie Dimon, the CEO of JPMorgan Chase, issued a sober economic forecast in his annual shareholder letter on Monday, warning that high inflation may prove more stubborn than expected, triggering rate hikes at the Federal Reserve and an eventual recession.

The billionaire financier also offered up a sweeping assessment of artificial intelligence and waded into an ongoing controversy over diversity, equity and inclusion.

Here are four takeaways from Dimon’s annual shareholder letter:

1. Sticky inflation

Dimon acknowledged strong economic performance of late but cautioned of long-term trends that could undermine the gains. He raised special alarm about the economy’s top threat: inflation.

Inflation has fallen significantly from a peak of 9.1%, but it remains more than a percentage point higher than the Fed’s target rate of 2%.

A host of factors, including government spending and global trading shocks, could make the final leg of inflation’s path down to normal levels much more difficult than many observers expect, Dimon said.

Other trends keeping inflation higher, he added: ascendant military conflict and the loans required for the transition to a climate-friendly economy.

The risks posed by ongoing inflation imperil efforts to achieve a “soft landing,” in which inflation returns to normal levels while the economy averts a recession, Dimon said.

“These markets seem to be pricing in at a 70% to 80% chance of a soft landing,” he added. “I believe the odds are a lot lower than that.”

2. Interest rates could soar

In recent months, the Fed has forecasted a series of highly anticipated interest rate cuts. Instead, the central bank may end up doing the opposite, Dimon said.

The Fed Funds rate stands between 5.25% and 5.5%, matching its highest level since 2001.

In response to potentially stubborn inflation, interest rates could soar past 8%, Dimon said.

Rate hikes would increase borrowing costs for consumers and businesses, potentially slowing economic activity through weaker household spending and company investment.

The ensuing economic stagnation could push the U.S. into a recession, Dimon warned.

A potential spike in interest rates could pose a broader threat than the crisis that befell Silicon Valley Bank and other regional banks last year, Dimon added.

“The mini banking crisis of 2023 is over, but beware of higher rates and recession — not just for banks but for the whole economy,” Dimon said.

3. Artificial intelligence could end up being as significant as the printing press

Dimon, who said JPMorgan Chase uses artificial intelligence in about 400 different ways, touted the technology as a breakthrough on the scale of some of humanity’s most influential inventions.

“While we do not know the full effect or the precise rate at which AI will change our business — or how it will affect society at large — we are completely convinced the consequences will be extraordinary and possibly as transformational as some of the major technological inventions of the past several hundred years: Think the printing press, the steam engine, electricity, computing and the Internet, among others,” Dimon said.

The stock market has climbed since the outset of last year, driven in large part by a group of major tech companies propelled by enthusiasm over AI.

Shares of Nvidia, a California-based firm that sells the majority of chips behind the AI boom, climbed nearly 500% since the beginning of 2023. Microsoft, part-owner of ChatGPT-maker OpenAI, has seen its stock price jump about 75% over that period.

JPMorgan Chase, meanwhile, has invested heavily in the technology, hiring roughly 2,000 machine-learning specialists and data scientists, and exploring avenues to incorporate the technology into every job at the firm, Dimon said.

4. Support for diversity, equity and inclusion

Diversity, equity and inclusion programs have become a lightning rod, stoking controversy in state capitals and corporate boardrooms.

In a section of the letter, Dimon advocated for the importance of DEI, outlining several initiatives at the bank aimed at supporting employees and customers who belong to marginalized groups.

Dimon touted affinity groups within the company devoted to connecting workers of various identities, such as Black or LGBTQ+ employees. He also promoted a company program called Women on the Move, which pursues the career advancement of women employees.

In 2020, JPMorgan Chase pledged to spend $30 billion over a five-year span to close the racial wealth gap. The company has nearly completed the initiative, Dimon said, announcing that JPMorgan Chase would continue the program as part of its normal operations.

“We believe that companies, and banks in particular, must earn the trust of the communities and countries in which they operate,” Dimon said.

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