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jamie dimon he's the ceo of the largest bank in america jpmorgan chase arguably the most influential voice in finance and on wednesday he shocked the world by saying the u.s should brace itself for an economic hurricane if you think i'm kidding or exaggerating take a listen for yourself it's a hurricane it's right now it's kind of sunny things are doing fine you know everyone thinks the fed can handle this that hurricane is right out there down the road coming our way we just don't know if it's a minor one or superstorm sandy or uh yeah sandy or or uh andrew or something like that and it's you better brace yourself now the media went crazy with the headlines following his comments but in today's video i intend to take a deeper look into his thinking and break down the various reasons why jaime may be correct and why the u.s should expect an economic disaster soon based on some real leading indicators we know it's notoriously hard to predict a recession it doesn't matter what the economy or stock market is doing somewhere out there somebody is always writing about the next big crash and most of these people end up being dead wrong since the end of world war ii in 1945 the us has had only 12 noteworthy recessions that's about one pair six years but today's decline seems a bit more dramatic how often does the ceo of the world's biggest bank a man whose entire career is based on carefully chosen words come out publicly and tell everyone to quote brace themselves it's exceptionally rare and bizarre ceos are essentially sales people whose job it is to paint their companies in the best light possible even in the worst of situations leaders will simply ignore warning signs and push happy narratives to investors all day long i can actually prove this because as it turns out jamie dimon was the ceo of chase since 2005.
now if you know anything about that era this was the heyday of cdos and profits banks were making a killing everyone was happy and the market was up and up then in 2007 people began to worry that cdos were incredibly dangerous it could potentially bring down the housing market and then the entire economy so look no further than the 2007 chase q2 report transcript this call was done july 18th about three months before the market would start its massive crash ending about 55 down during the call jamie states that the global economy is great corporations are strong unemployment is low and the economic backdrop is nice when asked about the cbos and their dangers he reassures the analyst by saying that quote these things are not something that should keep people up at night end quote and three months later we all know what happened so relying on the words of jaime diamond hasn't exactly been accurate in years past but this time jaime is on the other side of the fence claiming things will be bad not good and his reasons are pretty solid so who to believe is this just another 4d chess move by a big bank executive to get people to sell or is this an honest guy who's looking to warn the everyday man about the upcoming turmoil well that's the million dollar question what can we look at to get a real data-driven view regarding the situation turns out that one of the best reports on predicting a recession was done by guggenheim investments they looked at dozens of different indicators and then condensed them into a nice summarized report now without boring you to death with a long powerpoint we're going to be looking at just a few important points this fascinating report makes also keep in mind that it was created in 2018 so we're going to be using new data with their existing methodology to generate a new outlook it's the same concept just with fresh numbers one of the first things this report points out is that history shows us economic cycles exhibit fairly consistent symptoms leading up to a recession starting with a labor market that evolves from cool to hot and a monetary policy stance that progresses from loose to tight in response and we see that today we went from sky-high unemployment in 2008 to the tightest labor market ever although guggenheim partners uses its proprietary charts and data for their special unemployment gap chart we can replicate it using their very own formulas now to save you the boredom i'm just gonna tell you exactly where we are today using the same methodology and assuming the next unemployment number comes in line with analyst expectations we will be right here on this chart at negative one percent this puts us around nine to fifteen months away from a recession according to their estimates next up is fed tightening leading up to past recessions the fed has usually hiked rates beyond their natural rate to cool the labor market and get ahead of inflation only to inadvertently push the economy into recession right now we are here on the chart at approximately minus 1.5 which puts us around 24 months away from our session but there is an asterisk because the fed is expected to hike interest rates at a much higher rate to curb record high inflation by the end of the year we are expected to be right here which puts us about six months away from the recession so realistically this chart can be adjusted to say that given the estimated acceleration of rate hikes in the coming months it can be presumed that based on history we are 9 to 15 months away from recession today finally we have treasury yields one of the most reliable and consistent predictors of recession has been the treasury yield curve recessions are always preceded by a flat or inverted yield curve usually occurring about 12 months before the downturn begins right now this number reads 175 which puts us around 30 to 36 months away from a recession not exactly the bearish sentiment we were looking for the curve is headed towards that zero line but it's still got a ways to go so putting that all together we can say that based on history we are still easily more than a year away from a possible recession the labor market is very tight but the fed has really only talked about raising interest rates and the important treasury yield curves are not inverted or flat these findings paint a confusing picture on one hand we have historical evidence that suggests that we are still years away from a recession on the other hand this may just be a special unique outlier in economic history after all we just underwent a bizarre shock to the world by living through a historic pandemic followed up by a shocking war that placed commodities under serious pressure there is no telling how these two factors alongside unprecedented government money printing have altered the accuracy of traditional economic health checks for many the saying will be this time is different let me know what you think in the comments below and as always make sure you 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