U.S. Banking King: Recession Dead Ahead

 

U.S. Banking King:
Recession Now Just Months Away

“...Mild or hard recession.”

That’s the latest recession prediction from Jamie Dimon, the CEO of JPMorgan Chase. 

It’s nothing new. 

Dimon has been warning of a recession for months. 

The key difference that caught DWR’s notice is there is now timing as part of the prediction and he is citing the same factors we’ve been citing. 
 

The Waiting Is The Hardest Part

Dimon, someone who is surely briefed on real-time consumer and commercial banking trends, started getting really specific this week about the catalysts for a recession. 

He went on to cite the obvious of rising interest rates, global upheaval, etc. 

But when he got to inflation, something had changed in his forecast. 

He cited how the U.S. consumer built up $1.5 trillion savings, but inflation is eating away at that fast. 

He expects it to be completely wiped out in “Mid-2023.”

That’s something DWR has been talking about for a long time. 

Most recently was in Originally at Two Troubling Personal Financial Trends Are Accelerating where we look at the complete consumer numbers. 

Our conclusion hasn’t changed…

This will not end well. 

Investors should brace for the inevitable impact. 

Because it’s going to shake up a sizable share of the economy. 

Some sectors are going to get slammed as customers turn away from non-discretionary purchases altogether. 

But we’ve identified a few potential winners which will provide those same consumers a bit of relief. 

Let’s take a look. 

 

Savings Down, Credit Cards Up

One of the impacts of the pandemic and the cash thrown out by the government was a historic surge in U.S. savings. 

The total amount of cash saved by U.S. people surged from about $1.5 trillion before the pandemic to a peak of more than $4 trillion. 

Inflation and economic decline have eliminated all that savings and then some though. 

The chart below is from the Federal Reserve and shows the U.S. total savings:

 

The chart shows the entire story. 

Epic surge. Then  collapse. 

Altogether U.S. consumers have less savings than they did before the pandemic. 

That alone is bad.

But it gets worse. 

In order to make up for the declining savings and counteract inflation, consumers have turned to credit cards to fill in the gaps. 

This is a 5-year chart of the Credit Cards and other revolving debt loads from all U.S. consumers. 

 

It fell during the pandemic, but has surged since to past highs and beyond. 

These charts show the average consumer is in a bind and it’s still getting worse.  

There’s no way this ends well. 

Many consumers will have to “downgrade” their spending because their savings are too low and debts are too high. 

We’re already seeing surges in people moving in together and other impacts.