Jamie Dimon’s annual letter
In his annual letter released on April 5, 2018, Jamie Dimon, legendary investor and CEO of JPMorgan Chase (JPM), shared his views on the bond yield, the Federal Reserve’s gradual rate hike process, the potential US-China trade war, and the equity market.
Dimon’s view on the 10-Year Treasury yield
The billionaire investor believes the 10-Year Treasury yield could reach 4% in the near term. Currently, it’s at 2.8% as of April 6, 2018. It reached a four-year high of 3.0% on February 21, 2018. However, the broader market S&P 500 Index (SPY) and the NASDAQ Composite Index (QQQ) fell 0.55% and 0.23%, respectively, on the day.
The bond yield has been on a constant rise since September 2017. From September 8, 2017, to April 5, 2018, the 10-Year Treasury yield rose 38%. The sudden heightened improvement in the bond yield was mainly due to the expectation of a faster rate hike process by the Fed.
The increasing US budget deficit, the Fed’s lowering its balance sheet process, and the gradual rate hike process are all helping the 10-Year Treasury yield to rise. Dimon believes that with normal growth in the economy (SPY) and inflation moving toward the Fed’s 2% target, the 10-Year Treasury yield could reach 4% in the near term.
However, billionaire Jeffrey Gundlach recently said that the rising bond yield (BND) could affect the movement of the stock market. Due to this, he’s betting against the stock market. He said, “My idea that the S&P would go down on the year would become an extraordinarily strong conviction as the 10-year starts to make an accelerated move above 3 percent.”
In the next part of this series, we’ll analyze Jamie Dimon’s latest views on the Fed’s rate hike process.