JPMorgan Chase CEO Jamie Dimon announced in his annual shareholder letter that he believes we are in store for a bad recession in 2020.
“We don’t know exactly what the future will hold — but at a minimum, we assume that it will include a bad recession combined with some kind of financial stress similar to the global financial crisis of 2008,” Dimon said.
He presented the most adverse scenario which would involve a gross domestic product drop at 35% the annual rate in the second quarter of this year and the trend perhaps continuing through the remainder of this year.
In that scenario, unemployment could potentially climb as high as 14%.
That prediction, the CEO notes, is the most severe scenario and he believes that it is unlikely to play out.
But he announced that even in the worst case scenario, JP Morgan Chase still will be fine and plans to lend an additional $150 billion to its customers. (Chase is actively involved in accepting applications for programs like the Small Business Administration’s Paycheck Protection Program.)
For all of us credit card junkies out there this news is mostly good news.
We probably could all imagine a true worst-case scenario where banks entirely eliminate credit card rewards and essentially put an end to this hobby for the time being and perhaps for the foreseeable future.
I’m pretty sure miles and points were not a thing during the Great Depression, so we’ve never seen what a full out recession/borderline depression can do to a booming credit card rewards market so we are in many ways in uncharted territory.
But hearing the CEO remark on how much liquidity and assets the bank has and how he is not worried about Chase weathering a worst case scenario, makes me hopeful that at least when it comes to Chase, their credit card rewards programs will remain intact.
I’m not saying that it will not take a temporary hit as the CEO stated earnings “will be down meaningfully in 2020.” But as far as the rewards program completely dissipating overnight, I don’t think that is a likely outcome at the stage. The letter even reiterates that Chase is “[c]ontinuing to responsibly lend to qualified consumers.”
I still wonder about how some of the other large banks like Citibank and American Express are going to come out through all of this. It’s very difficult to imagine all of the major banks coming out unscathed so I am expecting there to be some type of downsizing when it comes to credit card bonuses and perks in the near future.
But hopefully these changes will be temporary.
I do believe that things will rebound but I think that that rebound could take a year or longer to get here, especially whenever it comes to travel.
Daniel Gillaspia is the Founder of UponArriving.com and the credit card app, WalletFlo. He is a former attorney turned travel expert covering destinations along with TSA, airline, and hotel policies. Since 2014, his content has been featured in publications such as National Geographic, Smithsonian Magazine, and CNBC. Read my bio.