The prophet of the rage of the markets published the annual letter. What bothers him?

According to him, the upheavals in the geopolitical arena are the main risk facing the bank and the global economy. He emphasized that the wars in Ukraine and the conflicts in the Middle East, with an emphasis on the tensions with Iran, must “permanently dispel the illusion that the world is safe.” Damon defined the current situation as “the realm of uncertainty”, and noted that regarding the confrontation with Iran and its effect on the commodity market, “time will tell” if the strategic goals will be achieved.

Regarding Europe, Damon sharpened the tone and claimed that the continent “is currently on a bad track”. He called for the establishment of a broad free trade agreement with all of Europe, but conditioned this on the implementation of economic and military reforms by the countries on the continent. At the same time, he referred to the global trade war and noted that “the trade battles are clearly not over.” According to him, while some of the tariffs are necessary for national security, it is difficult to predict their long-term effects on inflation and growth. In his letter, Damon repeated what he said earlier this year and described the possibility that inflation in 2026 would rise and become “the skunk at the party.”

Damon also referred to the recent shocks in the credit market, which included restrictions on the withdrawal of investors’ money from giant funds. He warned that this sector does not have sufficient transparency or strict valuations, which could lead to a wave of sell-offs if the macroeconomic environment worsens. He predicts that regulators will eventually be forced to demand stricter ratings and write-downs, which will require these entities to increase their capital significantly.

Finally, Damon referred to the AI ​​revolution as a historical change that is faster than the invention of the Internet, and made it clear that J.P. Morgan will not “bury its head in the sand”, but will embed the technology in all areas of its activities to remain competitive. Damon noted that “Overall, investing in AI is not a speculative bubble; rather, it will provide significant benefits. But at this time, we cannot predict who will be the ultimate winners and losers in AI-related industries.”

Damon added that “I don’t think it’s an exaggeration to say that AI will cure certain cancers, create new composites [לשימושים בתעשייה] and reduce deaths from accidents, along with other positive results. It will eventually lead to a shortening of the working week in the developed world. And people will live longer and safer lives.”