In his highly-anticipated annual shareholder letter, Dimon detailed the U.S. economy’s impressive recovery from COVID-19’s fallout while also arguing that the war in Ukraine and inflation rates not seen in four decades will slow current progress.

In last year’s annual letter, during a period of fast and sustained growth coupled with mild inflation, Dimon had held out hope the U.S. economy would enjoy a “Goldilocks moment” through 2023. But now the CEO is striking a different tone.

Investors should expect “very volatile markets” over the coming year, Dimon warned.

Here are five big takeaways from his letter.

Unprecedented risks

Dimon started with a warning: global economic challenges are mounting. Unprecedented risks from red-hot inflation, rising interest rates, and the war in Ukraine will translate into dramatic market swings, the CEO said.

Couple that with rapidly rising interest rates meant to cool an overheated economy and the end of quantitative easing—the Fed’s purchases of financial assets in order to increase the money supply and encourage lending and investment—and the U.S. economy’s future is uncertain.

The U.S. faces “completely different circumstances than what we’ve experienced in the past—and their confluence may dramatically increase the risks ahead,” Dimon wrote. “While it is possible, and hopeful, that all of these events will have peaceful resolutions, we should prepare for the potential negative outcomes.”

The war in Ukraine has also tempered JP Morgan’s outlook for global economic growth, Dimon noted. The bank now predicts U.S. gross domestic product (GDP) growth of just 2.5% this year, while the E.U. is expected to fare even worse, growing at a 2% annual pace.

“The war in Ukraine and the sanctions on Russia, at a minimum, will slow the global economy — and it could easily get worse,” Dimon wrote. “Many more sanctions could be added — which…along with the unpredictability of war itself and the uncertainty surrounding global commodity supply chains, makes for a potentially explosive situation.”

Dimon doesn’t typically predict recessions, and his bank’s strategy has always been to look through economic cycles and focus on operational excellence, but this year is a little different.

“Sometimes there are powerful underlying structural trends that we must try to understand since their impact can be so large,” Dimon said.

A strong U.S. economy and a tough position for the Fed

Dimon was mostly upbeat when talking about the current state of the U.S. economy. Consumers are flush with cash, wages are rising, and jobs are plentiful, he said, while praising the Fed’s for stoking rapid growth and reducing unemployment after the pandemic-induced recession. 

However, Dimon also noted that consumer confidence is declining and lower-income households are struggling as their earnings fail to keep pace with rising consumer prices. The U.S.’s 7.9% annual inflation rate has Dimon worried that the Fed may have overcooked the economy with excessive stimulus during the pandemic.

“In hindsight, it worked. But also in hindsight, the medicine…was probably too much and lasted too long,” he wrote.

Now, Dimon warns the Fed will be forced to raise interest rates at a pace that could lead to stock market volatility. Fed Chair Jerome Powell will have his work cut out for him if he hopes to ensure a “soft landing” for the U.S. economy.

“I do not envy the Fed for what it must do next: The stronger the recovery, the higher the rates that follow,” Dimon wrote. “If the Fed gets it just right, we can have years of growth, and inflation will eventually start to recede.” 

Still, Dimon struck an encouraging tone for investors by noting that the “economic landscape is completely different from the 2008 financial crisis,” when consumers and the financial system were “extraordinarily overleveraged.” 

Confronting the “Russia challenge”

Dimon also took a strong stance against Russia’s invasion of Ukraine, arguing it should be a “wake-up call” for Western leadership.

The CEO said the U.S. and its allies must work together on bold, bi-partisan solutions to confront Russian aggression and laid out a plan for U.S. action. The U.S. should raise its military budget, increase troop deployment along NATO’s borders, direct billions in aid to Ukraine, ramp up sanctions, and ensure energy security for the West, Dimon says.

“We need to pursue short-term and long-term strategies with the goal of not only solving the current crisis but also maintaining the long-term unity of the newly strengthened democratic alliances,” he said. “We need to make this a permanent, long-lasting stand for democratic ideals and against all forms of evil.”

The need for U.S. leadership

The U.S. must also assert itself as a global leader in order to confront rising geopolitical challenges ahead, Dimon believes.

“Power abhors a vacuum, and it should be increasingly clear to all that without strong American leadership, chaos likely will prevail,” he wrote.

Dimon went on to recommend that U.S. leaders be collaborative and compromising in their approach so as not to appear “arrogant,” and that they emphasize goals like a more equitable labor market, maintaining the strongest military in the world, and restructuring global trade.

He added that the U.S. must refocus on free enterprise, and although support is needed from the government, it should remember its limitations.

“To maintain our competitiveness, our country must regain its competence — and our principles, including free enterprise, need to be nurtured,” Dimon wrote. “Government, with its unique powers, has an essential role in managing the economy — but it needs to be realistic about its limitations on what it can and cannot do.”

A vulnerable global energy system 

Finally, Dimon highlighted the vulnerability of the global energy system that has been exposed by war in Ukraine. Sanctions against Russia have pushed U.S. gasoline prices to near all-time highs and threatened diesel shortages across Europe, demonstrating the interconnected and fragile nature of the global energy system.

In response, Dimon argues the West needs another “Marshall Plan,” like the one enacted in 1948 to provide aid to Western Europe after World War II, to help ensure energy security.

“Disruptions to the global energy system are again highlighting our urgent global need to provide energy resources securely, reliably and affordably and, at the same time, address long-term clean energy solutions and strategies to reduce our carbon footprint,” Dimon wrote. “These objectives are not mutually exclusive. We can — and must — do both.”

Dimon’s new “Marshall Plan” includes goals like promoting energy security, increasing investment in clean technologies, and ensuring governments’ leadership roles in spurring investment for low carbon energy solutions.