JPMorgan CEO Jamie Dimon, predicts rough times ahead for regional banks and warns of more deposit runs, as future interest rate hikes become increasingly likely.
Dimon warned at a May 22 Q&A Investor Day meeting at JPMorgan Chase that interest rates were likely to go higher from here and rise to as much as 7 percent.
He noted that there was much uncertainty about the health of regional banks and that rising yields in the money market have led to a steady outflow of deposits, bringing their balance sheets to dangerous levels.
A combination of Federal Reserve rate hikes and quantitative tightening is adding more fuel to the regional bank crisis. JPMorgan controls more than 13 percent of the nation’s deposits, with a lock on 21 percent of all credit card spending.
Under Dimon, the banking giant has gobbled up more of the lending market with each small bank failure, since the financial panic in March.
JPMorgan investors were told that they should expect to benefit from rising interest rates because of its recent acquisition of First Republic Bank. Dimon told meeting attendees, that net interest income this year would be revised from $81 billion to $84 billion, after the bank bought out the profitable operations of its smaller competitor in a deal with the FDIC.
Dimon Predicts Even Higher Interest Rates
Dimon addressed the central bank’s raising of the overnight rate and said there was still too much liquidity in the system.
The JPMorgan CEO said that the credit situation will probably get worse and that higher interest rates are likely, contradicting popular opinion that the Fed has reached the upper limit of its policy hikes. However, he assured investors that the U.S. economy was fine for now and that a “mild recession” would not hit until later in the year.
“Everyone should be prepared for rates going higher from here,” Dimon said, adding that capital is already tightening up and that the Fed funds rate would surge past its current level of 5 percent, to as high as 6 or 7 percent.
“There’s a chance you could have rates ticking up and not just 3.78,” said Dimon, calling 7 percent interest rates an “outlier but possible.”
Fed’s Quantitative Tightening Policy May Cause Another Bank Liquidity Crisis
With the Fed Funds rate at 5.25 percent and with Treasuries and money market funds offering similar yields, smaller banks are now buckling under the pressure. This could spark another disastrous bank deposit run from both checking and saving accounts.
Meanwhile, the Fed’s quantitative tightening policy is causing its monetary reserves to shrink and drying up the supply of available liquidity for banks, said Dimon.
The JPMorgan chief said that higher capital charges from the Fed would hurt the smaller banks, but not their larger peers like JPMorgan. He said that smaller banks face more problems on the deposit side, as they are less likely to absorb a financial blow from a lack of liquidity.
The American banking sector had benefited from low loan defaults over the last few years, due to almost zero interest rates and the flood of government stimulus money during the pandemic.
For two decades, lenders were encouraged to buy up low-yielding securities, but the vulnerable regional banks are now being squeezed, as yields soar and fixed-income and loan prices plunge. Deposits will now have to shift into treasuries, or face liquidation in a future bank run, said Durden.
“We haven’t been through Quantitative Tightening. So we really don’t know what’s going to happen to deposits at all. And that’s why I’ve been quite concerned about that. I’m probably more concerned about quantitative tightening with anybody in this room,” warned Dimon.
“We’ve never had QT before. It just started, okay? And you see huge distortions in the marketplace already.”
“We’ve never had the Fed in the market like this … They have $2.3 trillion basically lent out to money funds. And I don’t know the full effect of that. And obviously, that’s a direct deduction from deposits are rolling out it made sense to do,” he said.
“So I think people should build into their mindset that they may have to move deposit beta more than they think and manage that. So I mean, if I was any bank or any company, I’d be saying, can you handle higher interest rates and surprise in deposits, etc?” Dimon continued.
Commercial Real Estate Sector Exposed To Credit Crunch
Before the failure of Silicon Valley Bank set off the recent bank crisis, uninsured deposits were generally not seen as a problem, said Dimon, but the regulatory moves made in response will lead to tighter credit for smaller lenders.
This will in turn lead to even tighter credit from lenders to customers.
“You’re already seeing credit tighten up because the easiest way for a bank to retain capital is not to make the next loan,” he explained.
As banks raise the bar for lending, the commercial real estate sector is expected to suffer the most from tighter credit, which may spread to the wider economy. About 80 percent of commercial real estate loans are granted by the regional banks, which have been rattled by the monetary policy of the Fed and the outflow of capital, according to Goldman Sachs.
“There will be a credit cycle. My view is it will be very normal” with the exception of real estate, Dimon said, and that “there’s always an off-sides.”
He explained that “the off-sides in this case will probably be real estate. It’ll be certain locations, certain office properties, certain construction loans. It could be very isolated; it won’t be every bank.”
Commercial properties in upscale markets, like San Francisco and New York, are already losing money, as workers increasingly prefer to work remotely.
Article cross-posted from our premium news partners at The Epoch Times.
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Two Storms, One Harvest
Every food crisis in living memory has been a one-shock event. The 2008 price spike was a commodity bubble. The 2020 shortages were a logistics failure. The 2022 grain scare was a war on one exporter’s ports. Each time, the system bent, adjusted, and recovered, and each time the experts assured us afterward that global markets are simply too big and too diversified to fail.
What nobody in Washington seems eager to discuss is that 2026 is shaping up to be something the modern food system has never actually faced. Two independent shocks, one climatic and one geopolitical, are converging on the same harvest cycle at the same time. Not sequentially. Simultaneously.
Start with the weather. The Pacific Ocean is currently building toward what forecasters now openly call a record event. NOAA’s Climate Prediction Center puts the odds of at least a strong El Niño near 88 percent, with roughly two in three odds it reaches “very strong” status, the tier reserved for perhaps three or four events in the entire satellite era. Every major global model now projects a median peak in Super El Niño territory, and most of them project it exceeding the 2015-16 event, which until now held the modern record. Sea surface anomalies were already brushing the super threshold in mid-July, months before these events normally peak. The atmosphere has already shifted into El Niño mode, and the event is forecast to crest in late fall and early winter.
This is not about “climate change.” It’s about the standard cycles of weather, and the cycle we’re currently in is one that has likely devastated societies in the past. We’re better prepared as a society today, but not all Americans are equally prepared.
Serious households have started doing the quiet math on their own. Grocery bills tell part of the story, and the forecast maps tell the rest, which is why long-term food storage has moved from fringe hobby to mainstream line item in the family budget, with established suppliers like Heaven’s Harvest seeing demand from people who five years ago would have rolled their eyes at the idea. That instinct is not paranoia. It is pattern recognition, and the pattern is worth walking through carefully.
Editor’s Note: Heaven’s Harvest IS a sponsor, but the warnings of this article are real and would be written even if we didn’t have a survival food sponsor. With that said, those who take advantage of what they offer can use promo code “Patriot” for 15% off.
The Fertilizer Clock Is Already Running
While the Pacific warms, the second shock has been unfolding in the Strait of Hormuz. The conflict with Iran turned the world’s most important energy chokepoint into a contested waterway, and the consequences reach far beyond the gas pump. Roughly a third of global fertilizer trade moves through Hormuz, and the disruption sent urea prices up 86 percent year over year by March, with a 53 percent jump in a single month.
The World Bank projects energy prices rising about 24 percent in 2026 and fertilizer about 31 percent. By its own accounting, fertilizer prices ran 35 percent higher in the first five months of this year than the same period last year.
Here is the mechanism the nightly news will not explain. Fertilizer is not a grocery item. It is a time-delayed input. The nitrogen a farmer in Iowa or Punjab could not afford to apply this spring does not show up as a problem this spring. It shows up as a thinner harvest six to twelve months later.
The World Bank’s own food security brief concedes that the effects of reduced applications earlier this season “are likely to become visible only later in harvest outcomes.” Translate that from institutional language into plain English and it means this. The damage is already done, it is already in the ground, and we are simply waiting for it to arrive on the shelf.
Now check the calendar. Six to twelve months from the spring planting season lands us squarely in late 2026 and early 2027. Which is precisely when the strongest El Niño in the instrumental record is forecast to peak, bringing its signature droughts to Southeast Asia, Australia, southern Africa, northern Brazil, and South Asia, the very regions that grow the world’s rice, sugar, and oilseeds.
The World Bank warns openly that a strong El Niño “could disrupt multiple crop belts simultaneously” on top of the conflict-driven input costs. Their baseline projection assumes the Middle East disruptions ease by autumn. What in the last two years of Middle East history suggests that assumption is safe?
The System Has No Slack Left
The comfortable answer is that global markets always adjust. But adjustment requires slack, and the slack is gone. Global cereal production is expected to decline from last year’s records even before El Niño does its work. The UN World Food Programme, hardly a den of right-wing preppers, is calling this the most significant disruption to its supply chains since Covid and the invasion of Ukraine, and its supply chain director put the stakes bluntly.
Today’s supply chain challenges are tomorrow’s hunger crisis.
There is also a political dimension that markets cannot price. When food gets scarce, governments do not behave like economists. They behave like politicians. Export bans, hoarding mandates, and panic buying at the national level turned the modest rice shortfall of 2008 into a global crisis, and analysts are already warning that import-dependent nations are the first dominoes.
The 2015-16 Super El Niño, a far weaker event than what is now forecast, threw tens of millions into food stress across Africa and Asia. This one is projected to be stronger, and it arrives with fertilizer already rationed by price and shipping lanes already contested by missiles.
What Joseph Knew
Scripture does not treat preparation for lean years as faithlessness. It treats it as wisdom delivered in advance to those willing to act on it.
Behold, there come seven years of great plenty throughout all the land of Egypt: And there shall arise after them seven years of famine; and all the plenty shall be forgotten in the land of Egypt.
Joseph did not respond to that warning with a hashtag or a committee. He stored grain during the years of abundance, and when the famine came, Egypt stood while its neighbors begged. The lesson is not that famine is certain. It is that the time to prepare is precisely when preparation still looks optional.
Nobody who filled a pantry in a year of plenty has ever regretted it, and nobody standing in an empty aisle has ever been glad he waited for certainty.
None of this calls for panic, and panic is the enemy of sound judgment anyway. It calls for the same unglamorous prudence our grandparents considered ordinary. Keep some cash margin, know your local growers, and put real food in deep storage while it is cheap and available, because the entire arc of this story is that cheap and available is a closing window.
Families looking for a straightforward place to start can visit Heaven’s Harvest and use promo code Patriot for 15 percent off long-term storable food. The forecasts may yet soften, the strait may yet reopen, and we should pray they do. But hope is a fine thing to hold and a foolish thing to eat.