I am here with somebody who does not need an introduction. Jamie Dimon, who is the CEO and chairman of JPMorgan. It's a really interesting day to have this, first of all, a huge turnout. But the focus, at least in the news world, is very much in the geopolitics. And I'm wondering from your perspective, you talked about geopolitics for a long time. Are you surprised that the market has been so sanguine to any kind of response or any kind of geopolitical disruption?
Not really. So one of our brilliant folks wrote a report years ago, Mike Cembalest, that you look at all these wars around the world since World War Two, the market reacts, but it never had a real long-term effect other than the Israeli conflict. Oil prices tripled. It went on for an extended period of time in 1973. So the world kind of takes this dry, but geopolitics is a major issue. It's much more complex today than it has been since World War Two. You've got Ukraine, Russia, Iran, North Korea, laden with China. And that could have an effect, but it may not. So these things may diminish over time. You know, this war with Iran, you know, it is short and oil goes to 80 or 90, 100, but it is just short and not for long. It probably will have a major effect if it becomes prolonged and perpetual to tell you how upside for this market be.
If there were truly a stagflationary shock, given the fact that there seems to be comfort with the idea of disinflation right now?
Well, I think that's true, but I think that was true before this war. So if you look at it, my view is the price of asset prices are going high, credit spreads are kind of low. It's got a lot of complacency in the market. I'm not sure. You know, we look at risk, we look at the broad range of outcomes and there are negative outcomes. But one of them would be, you know, inflation, I call it. That's the skunk at the party. So it's been coming down, but it seems to maybe leveled off around 3% if things make it go up. And this is only one thing. You know, you can look at medical prices, construction prices, insurance prices, wages for sure, and things, other things. You know, inflation is a big thing. It's not just oil. So, you know, we'll see. Right now, this will add a little bit, literally a teeny bit to inflation. Not a lot.
You know, I was surprised because things were kind of gloomy coming in today. And the mood here is not that actually there's a lot of optimism. There are a lot of different companies that are building things and investing things. I mean, how vulnerable really is the US economy right now to some sort of geopolitical shock?
It may not be geopolitical, it may be the companies are start to lay people off. And so I think the most important thing in the world is geopolitical. What happens to free Western democratic world, which is kind of been under attack by Russia and Ukraine, by Iran in the Middle East, you know, a little bit by China wants to, you know, divide and conquer the Western world and, you know, both militarily and economically, you know, you have all their neighbors are rearming because they're actually not going to anyone else. So those are the most important things I did. Global deficits are so large. But those are those are like I call it, like large moving tectonic plates that may or may not affect the economy in the short run. They may be determinative in the longer run. And some of these things we talk about war, you know, Vietnam, you know, did it affect the economy in the very short run? No. It had a 20-year effect after that. So you had to look at these things as they're moving plates. Still can take five years to have an effect, but effectively right now, the economy is doing fine. Asset prices are high. People are assuming things go on. I mean, nobody you talk to has any idea that credit spreads can get bad a lot and they could just because of sentiment. And so I think there's a little bit more exuberance. I think there should be. But we've had years of it. And you know, the one big beautiful bill adds to growth this year, bank deregulation, other deregulation adds to growth and animal spirits. So we'll see. But you point out, I think, you know, the skunk would be inflation. So we've got to keep our eye on that one closer.
Yeah. Well, and this actually speaks to something that people are wondering, which is what's going to potentially crash the party before we get into credit. More significantly, I know that JPMorgan has been expanding significantly in the Middle East, particularly in Riyadh and Dubai. If you take a longer-term view, does any of what we're seeing now have the potential to shape that effort to expand either in the positive direction or potentially to withdraw in the effort?
I mean, the way I look at it creates more risk. It creates more chance of a positive outcome. So all those nations have been modernizing, educating their people, you know, adopting more and more Western methods to open up their markets, bring in foreign direct investment, invest overseas. That won't change. In fact, and Tom Friedman wrote about this in his paper today, that this creates a bigger opportunity for long and just peace in the Middle East and writ large, not just Iran in this war, but, you know, Saudi Arabia, UAE, some path to statehood for the Palestinians in Gaza and Palestinian. That's going to be up to them. I know there are reasons to be optimistic. This opens the door for that. You know, and there are a lot of naysayers. And I understand that if things go south, they could say, I told you so, but this does open up the door for that. Hopefully we're wise enough to help move in that direction. And if you are close, is right in the Middle East, Saudi Arabia, UAE, Qatar, Kuwait, they all want peace. And they all know that like really growing and having a great economy is a lie in that you want to get more foreign direct investment, you need peace and things like war. Reduce the chance for people to want to put your real aggression in the ground. So, you know, and then they even set up a shadow government for the Palestinian Authority with Palestinians. But professionals, lawyers, doctors, business people to create maybe a governing structure that can actually only corruptly govern Palestinians and create peace on the ground there and, you know, have Israel and Palestine working know a long-term course. But of course, to, you know, peace side by side with statehood. So we'll see. I mean, look, and that way I want to be optimistic. Even though it's been terrible now for a long time.
You were talking about. Right. And I do want to return to it and what potentially caused the credit cycle to crack, even if we don't know the catalyst. Do you have a sense of what this credit cycle is going to look like if it's going to be akin to something that we've seen in the past or if it's going to have a new kind of dynamic?
Yeah, so some things rhyme and some things never change. Okay. There will be a credit cycle. It's usually caused by a recession. The type of recession determines the nature of it. So stagflation is very different than just a recession. Obviously, the depth of the recession and a credit cycle is a normal cycle. But one of the things that's always different is which industries get really badly hurt. Like you may remember in 2002, it was telecom and utilities. You know, the MA stocks, they pay dividends in '08 is Warren Buffett stocks, media stocks. You know, this time maybe it's software, maybe it's not. But somebody is moving to change, changing type of credit. I do think it'll be things that cause a recession could be geopolitics. It could just be, you know, people pulling back on their spending and companies are laying off or they can't pass on prices or or something like that. But I do think we have that cycle. It will be worse than people expected. We're late in the cycle. We'll let you entrance. There's some people out there who aren't doing great credit. Can you see the other side of it? And I'm not talking about private credit to about credit in general. That could be insurance companies. It could be private credit. It could be banks. We see some banks doing things that, you know, we probably wouldn't do. So. So there will be and this is about credit. There's always if you look at the outcomes, there's always the people did it well. They still have a cycle and the people did it really badly. So that's not going to surprise me when we find out who the who's will be naked when the tide goes out.
You don't think you don't think the private credit is the epicenter?
No, because private credit, I mean, give you big numbers. Corporate debt. Generally in pretty good shape. Consumer debt, generally in pretty good shape. And you take private credit leveraged lending 1.7 trillion, thanks to 1.7 trillion. The high yield market, 1.7 trillion. I wouldn't put that in a systemic category even if it gets worse than people expect.
So do you think, given the fact that JPMorgan is lending significantly as well, I'm just wondering how you sort of guard against a credit cycle that you think is going to be worse than people expect at the same time that there are opportunities and there's a growing economy.
