To The Moon

The Great Brush Off.

On Sun, 01 Jun 2025, in an interview on CBS - "Face the Nation", US Treasury Secretary - Scott Bessent dismissed $JPMorgan Chase(JPM)$ CEO, Jamie Dimon's warning that “Rising national debt could cause a bond market crisis”. (see below)

This happened after Dimon sounded alarm last week, cautioning America's (a) overspending during the pandemic and (b) Quantitative easing (QE) will lead to a 'crack in the bond market'.

Bessent brushed off his fears, alleging Dimon had, throughout his 'entire career' issued stark predictions and 'none of them have come true'.

That explained why Dimon is a banker; albeit a great one, as he always tries to look around the corner', said Bessent to 'Face the Nation’s host Margaret Brennan.

Bessent argument:

• The Trump administration is going to bring deficit down slowly.

• Highlighted how US is 'taking in substantial tariff income right now.

• Estimated could save $2 trillion in the process.

• Also pointed to Trump's plan for price controls on pharmaceuticals, will 'substantially push down costs for prescription drugs' and save the country 'another trillion'. '

• US gross national debt was not an overnight created issue but a long process in the making.

• Trump’s administration’s goal is to bring national debt down over the next 4 years.

• The deficit in 2025 is going to be lower than2024, and in 2 years it will be lower again'.

Dimon - America's top banker, was not fazed by Bessent's dismissive remarks and doubled down on his debt warning Monday.

Dimon told Fox Business' Mornings with Maria:

• Warned of risks including stagflation, persistent inflation, and the threat of a recession.

• That could lead investors to question US dollar’s dominance if US economy weakens further.

Dimon’s concerns are partly reflected in US economic reports (1) recent GDP contraction, (2) soft retail sales, and (3) signs of consumer strain.

He did qualify that these downside risks, are not yet fully realized in the data.

• US national deficit is a 'big deal' that could create a 'tough time' for the bond market.

• At its worst, that causes spreads to widen.

• Should investors decide that the US dollar is not the place to be, that could cause credit spreads gap out and it would be quite a problem because it hurts the people raising money.

• That includes small businesses, that includes loans to small businesses, includes high yield debt, includes leveraged lending, includes real estate loans.

• That explains why everyone should be concerned about volatility in the bond market.

The comments were consistent with Dimon’s his earlier warnings — about potential market turmoil, citing rising US government spending.

During an interview at the Reagan National Economic Forum on Fri, 30 May 2025:

• He warned of a 'crack in the bond market'.

• Added that while the market may panic when it happens, the bank would likely benefit.

This is because Market makers like JPMorgan often benefit from volatility, as frequent exchange of assets drives up brokerage fees for their trading desks.

So will $Goldman Sachs(GS)$ is a leading global investment bank & financial services company.

Like JPMorgan, Goldman Sachs often profits during periods of heightened market volatility, as its trading and market-making operations see increased activity and revenue from fluctuating asset prices.

The firm is also a bellwether for Wall Street’s sentiment on risk & liquidity.

The Catalyst.

Shifting US economic policies have sent bond markets tumbling in recent weeks.

Trump's flip-flop on trade policies, along with suggested tax cuts and spending surge, have sent the bond markets tumbling in recent weeks.

The rise in treasury yields post 'Liberation Day' tariffs, which Trump described as the bond market acting 'yippy', forced him to hit a 90-day pause on tariffs. (see below)

Just for the record, Dimon has been running the biggest US lender for more than 19 years, outlasting many other CEOs.

To dismiss his knowledge of US market and economy will be foolish.

It is not just Dimon who is sounding out potential crisis.

Ray Dalio, founder of Bridgewater Associates, the world’s largest hedge fund (eg. $SPDR S&P 500 ETF Trust(SPY)$, $iShares Core S&P 500 ETF(IVV)$, $iShares Core MSCI Emerging Markets ETF(IEMG)$ etc..) issued similar warnings. (see above)

Proof Is In the Pudding.

Do not just take the words of these financial gurus at face value.

Looking at the latest US latest economic reports, their stories are aligned to these men’s warnings.

US Gross Domestic Product - Q1 2025.

• The 2nd preliminary reading for US’s Q1 2025 gross domestic product (GDP) is still showing the -0.2% contraction vs 1st preliminary reading of -0.3%.

• It can be regarded as a slight “improvement”, but it is still below the 0% level in negative territory.

US ADP Non-Farm Payroll - May 2025.

• The latest US private sector payroll for May 2025, rose by just 37,000 jobs - the lowest in more than 2 years.

• Could “safely” disregard the US jobs opening and labour turnover surveys (JOLTs) report. This is because the 03 Jun 2025 report is for month of April 2025, not the “latest”.

• Inflation is cooling but not tamed. Click here ! for the latest US inflation data, Repost & give a like ok - thanks.

US Consumer Spending (MoM) May 2025.

• Consumer spending picked up in March and April 2025, with consumers going on a big-ticket item shopping spree before Trump’s tariffs kicked in.

• Even though the full tariffs have been postponed for 90-days, expiring in July 2025, there is still a 10% baseline tariff enforced.

• Consumers are now tightening their belts as the full on effect of Trump’s tariffs may be felt soon.

$Wal-Mart(WMT)$ is the largest US retailer, can also be regarded, a key indicator of consumer health.

In times of economic uncertainty or when tariffs raise costs, Walmart’s broad product range and reputation for value can attract budget-conscious shoppers.

The company often outperforms during periods of consumer belt-tightening, making it a defensive play in a volatile environment.

Effect On Investors.

The divide is prompting investors to reconsider their strategies.

Many are moving to shorter-duration bonds or seeking hedges against further volatility.

Era of treating US Treasuries as a risk-free asset is being questioned, and portfolio managers are being urged to adopt a more defensive posture.

One possibility is to consider $Procter & Gamble(PG)$, a consumer staples giant.

It produces essential household and personal care products.

Steady demand, even during economic downturns, makes it a classic defensive stock.

Investors often turn to companies like P&G when seeking stability & reliable dividends amid market turbulence.

Impact on US Stock Market

(1) Volatility and Risk Premiums:

• The disagreement amplifies uncertainty, that can increase risk premiums across all asset classes.

• As Treasury yields rise, the cost of capital for businesses increases, potentially weighing on corporate profits and stock valuations.

(2) Confidence and Flows:

• Should Dimon’s warnings gain traction, and investors believe a fiscal crisis is imminent, there could be outflows from both bonds and equities, leading to broader market selloffs.

• This was already observed in April 2025, when a bond selloff contributed to a sharp correction in stock prices.

(3) Macro Policy Influence:

• The debate may influence future policy decisions eg. (a) spending cuts, (b) tax increases, or (c) changes to entitlement programs.

• Market’s response to these measures will depend on whether they are seen as credible steps toward fiscal sustainability or as threats to economic growth.

Is it time to sell profitable positions while still ahead of the curve. At the same time pray that losing counters can recover in time for a quick exit before US market undergo a correction ?

Don’t miss out my other picked posts for Friday - see below ! Remember to Repost & share so that more will come to know ok. Thanks.

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• Do you think Jaime Dimon of JP Morgan is right about US economy & market ’?

• Do you think Scott Bessent can influence Trump to do the right thing for US economy ?

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