Investing

If Jamie Dimon Is Right, Stock Market Will Collapse

Douglas A. McIntyre

Published: April 9, 2024 6:25 am

Jamie Dimon, the head of JPMorgan and the most famous banker in the world, made several comments in his shareholder letter that should frighten stock market investors. Due to rising costs of everything from military activity to government spending, he said, “This may lead to stickier inflation and higher rates than markets expect.” He forecast that rates could reach as high as 8%. If that happens, the stock market will be well below where it is today.

The last time interest rates were even close to 8% was in early 2000, when they hit 6.7%. The last time they were over 8% was in 1990. The run-up in rates in 2000 coincided with one of the greatest collapses in the market in recent history. The tech-heavy Nasdaq dropped 39% in a year. Today’s market has been driven by very few tech stocks, which many consider overvalued because some have doubled or tripled in the past two years. (These six dividend stocks safeguard you during a market crash.)

What does a 39% reset in the Nasdaq look like? The market would collapse worse than it did in 2022. The “hottest” stocks, like Meta and Facebook, could lose half their value as they did two years ago.

What major stocks would be vulnerable to another market collapse? Certainly, Nvidia, Amazon, and Meta. They have been a huge part of the current market surge.

Another comment Dimon made should frighten investors even more. Referring to the current geopolitical problems, which could turn into a regional war in the Middle East or Ukraine, “may very well be creating risks that could eclipse anything since world war two.” If that happens, the stock market may readjust down much more than 39%.