Jamie Dimon Annual Letter to Shareholders

Claude Monet, 'La Seine à Lavacourt,' 1879, oil on canvas. Christie's; The Collection of Peggy and David Rockefeller.

Thursday morning, Jamie Dimon of J.P. Morgan published his annual Chairman & CEO Letter to Shareholders.  In this highly anticipated letter, not only did Dimon recap the previous year for all J.P. Morgan shareholders, but he also expressed his views on the current state of the global economy. Although the stock market has continued to climb to new highs in the first half of 2019, in the letter, Dimon cautioned shareholders not to forget last year’s performance, specifically the extremely volatile 4th Quarter. Despite hitting an all time record close in October, for 2018, the Dow Jones Industrial Average returned -3.48% and the S&P 500 Index returned -4.38% (both figures including dividend reinvestment). The sharp sell off in the stock market and subsequent period of uncertainty marked the first decline in global stocks since 2011, and Dimon states that this “might be a harbinger of things to come.”

He expands:

“But in the fourth quarter, growth slowed in Germany; Italy repudiated European Union rules; Brexit uncertainty remained; and fear spiked around America’s trade issues with China. Among other geopolitical tensions, the U.S. government shutdown began. In addition, more questions arose about interest rate increases in the United States and the effect of the reversal of unprecedented quantitative easing, particularly in this country.”

As potential reasons for concern, Dimon cited many economic uncertainties, potential sources of instability and volatility in the near term.  The International Monetary Fund and The World Bank seem to agree that current market conditions point to an economic slowdown. With the recent record highs in the stock market, investors must ask themselves some tough questions:  is it time to realize some of my gains? How much should I be protecting toward a correction or future sell off? Should I rebalance my portfolio? In times of uncertainty, investors often rethink their approach to the market and the level of portfolio risk they are able to assume

So, for those investors who wish to diversify their portfolio, there are several alternative and hard assets available, such as gold, cryptocurrency, real estate, and art.  More specifically, art has become increasingly interesting when included in a well-balanced, global portfolio. Art may offer attractive, uncorrelated, risk-adjusted returns and may also enhance strategic asset allocation. Blue-chip art has averaged returns of +8.9% per year since the year 2000, and historically has acted as a natural hedge against cross-currency movements.  One of the country’s most well respected banker’s is suggesting continued economic stress on a global scale, and Dimon’s letter indicates it may be time to reevaluate optimal portfolio allocations and understand all alternative investment options.

For continued reading, please refer to our article:  What Happens to Art in a Financial Crisis?

Sources:

Jamie Dimon’s Letter to Shareholders, Annual Report 2018

International Monetary Fund World Economic Outlook Update, January 2019

The World Bank: Global Economic Prospects

Artprice100

Christie’s: The Collection of Peggy and David Rockefeller: 19th and 20th Century Art, Evening Sale

[1] “Blue-chip art” defined by the Artprice100® Index of the top 100 artists, such as Monet, Warhol, Picasso and more.

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