Are we already in the early stages of World War III?
JPMorgan CEO Jamie Dimon thinks we might be, with conflicts boiling in Ukraine and the Middle East.
During a recent talk at the Institute of International Finance, he said a broader conflict might not be a matter of if but when.
"World War III has already begun. You already have battles on the ground being coordinated in multiple countries."
Dimon pointed out the tightening alliance between Russia, North Korea, and Iran. He previously dubbed these countries an "evil axis.” During his talk, he warned that with the cooperation of China, they are actively seeking to dismantle current global structures and are a threat to Western stability.
"And they're talking about doing it now. They're not talking about waiting 20 years. And so, the risk of this is extraordinary if you read history."
Dimon insisted that the United States should consider more aggressive intervention.
"What we should be thinking about is we can't take the chance this will resolve itself. We have to make sure that we are involved in doing the right things to get it resolved properly.”
Of course, the U.S. doesn’t have the best track record when it comes to resolving things “properly.” This strategy comes with its own risks of escalation.
Whether the U.S. becomes more actively involved or not, geopolitical risk is certainly something investors should be aware of.
Dimon said concerns about a potential economic hard landing are "teeny" compared to the threat of these localized conflicts in the Middle East and Ukraine escalating into a global war.
“Look at how we tripped into World War II. When Czechoslovakia was split up — sounds a little like Ukraine — that was the end of it. Until they invaded Poland.”
Dimon said JPMorgan analysts run scenarios involving an escalating war. He said some of those scenarios “would shock you.”
“I don't even want to mention them.”
Apparently, some of those scenarios involved things escalating to nuclear warfare. He pointed out that Russian President Vladimir Putin has threatened “nuclear blackmail”
"If that doesn't scare you, it should."
Dimon said nuclear war was the biggest threat to humankind.
"It's not climate change; it's nuclear proliferation. We've got to be very careful about what we're trying to accomplish in the next couple of years."
CEO Today noted that this kind of messaging from the head of one of the world’s largest and most influential financial institutions “underscores the depth of concern over coordinated military moves and escalating tensions that threaten to ignite wider conflict."
CEO Today also pointed out the potential economic ramifications of a broader global conflict.
“Financial markets, already jittery from inflationary pressures and fluctuating interest rates, would be especially vulnerable. Supply chains could face new disruptions, particularly if key shipping lanes or trade routes become conflict zones. Industries ranging from tech to energy would not escape unscathed. Oil prices, which are often volatile during geopolitical crises, could skyrocket, worsening inflationary pressures worldwide. For everyday consumers, this could mean not only higher gas prices but also more expensive goods and services as costs ripple through supply chains. For investors, Dimon’s warning may be an unwelcome harbinger that signals a shift in portfolio strategies and global investment patterns.”
We may already be seeing these shifting strategies.
According to the World Gold Council, safe-haven buying due to “geopolitical turbulence” was a significant factor in record third-quarter gold demand that pushed prices to a series of record highs.
Dimon may well be overstating his case, but there is undeniably a high level of geopolitical uncertainty bubbling around the globe. Whether we’re bumbling toward a global war or if these conflicts play out on a regional level, it is always wise to be prepared for potential economic fallout. Wars disrupt supply chains. They also boost government spending and money creation, introducing more inflationary pressure into the economy.
So, even if you think Dimon has hit the panic button too early, you should still consider how to hedge your portfolio for these worst-case scenarios.
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