JPMorgan CEO Jamie Dimon warns of possible stagflation – a challenging mix of high inflation and slow growth reminiscent of the 1970s. Speaking at several events, including an interview with The Associated Press, Dimon worries that inflation could rise further, with U.S. debt exceeding $35 trillion, as interest payments on debt exceed essential program spending.
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He estimates that there is a 35% chance of stagflation, although he thinks a recession is more likely. He is also concerned that geopolitical conflicts and supply chain issues could worsen economic risks. With these warnings, experts urge the establishment of a balanced financial plan to counter possible economic challenges.
Jason Furman, a Harvard economist, suggests that flexibility in financial planning is crucial, especially given that the Federal Reserve’s monetary policy can still change as it tries to curb inflation without stifling growth.
According to a Reuters report, US inflation had already fallen to 2.1% in September, close to the Fed’s 2% target. This indicates some success in controlling rising prices. However, Dimon believes inflation could be more persistent than expected, especially if wage growth continues at its current pace
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To avoid potential stagflation, experts recommend diversifying your portfolio. According to Greg McBride, Chief Financial Analyst at Bankrate, investing in tangible assets such as gold and fixed-rate mortgages can be a good hedge because they tend to hold their value better during periods of inflation.
Likewise, defensive stocks, especially in sectors such as consumer staples and utilities, could provide stability. For example, companies like Walmart, which focus on essential goods, could be better positioned to weather an economic slowdown.
Another prudent step is to maintain liquidity. Experts recommend maintaining a healthy cash reserve as it provides a cushion to manage unexpected expenses in a high-inflation environment.
