The billionaire CEO of JPMorgan remains unconvinced that the current strength in the housing and stock markets will be enough to buoy consumers in the long term, warning that although the economy is in “pretty good shape” at the moment, that could all change relatively swiftly.

Speaking during a Barclays financial conference in New York this week, Dimon said there are some “huge buts” that come with the optimistic economic data, be it consumer spending, incomes, or savings levels “normalizing.”

“I just think people make a mistake to look at real-time numbers and not look at the future,” Dimon told Barclays managing director Jason Goldberg, adding: “And the future has quantitative tightening. We’ve been spending money like drunken sailors around the world; this war in Ukraine is still going on.”

Government spending has ballooned since the onset of the COVID pandemic, when policymakers cracked open their war chests to save lives and jobs. However, in February 2022 another request for financial support came in: this time from Ukraine following its invasion from Russia.

According to the most recent data from the International Monetary Fund for 2021, government debt as a percentage of GDP for most nations is still extremely unbalanced: These countries aren’t producing as much as they owe, therefore raising questions about their ability to pay back their debts.

For example, in the U.S., government debt weighs in at 128% of GDP, while it’s 104% in the U.K. and 113% in Canada.

The Biden administration’s spending spree became a key political point earlier in the year, with Congress at odds over whether to raise the debt ceiling or risk a default.

Although crisis was averted this spring, it’s a sign even government’s magic money trees will one day run dry.

With that in mind, Dimon added: “To say the consumer is strong today, meaning you got to have a booming environment for years, is a huge mistake.”

Business outlooks will change

Dimon added that government spending isn’t just topping up individuals, it’s also providing a boost to businesses.

He highlighted that in the U.K., for example, the government stepped in to help both households and businesses with their energy prices, adding: “God knows what it’s going to cost them this winter.”

“There’s a lot of fiscal stimulus taking place out there…so we’re still living on that, and that’s really strong,” Dimon continued. “And of course, that drives everything, including business results.

“So businesses feel pretty good because they look at their current results, they’re not so bad. But those things change.

“And we don’t know what the full effect of all these things are going to be 12 or 18 months from now.”

Cracks are already beginning to show in sectors like real estate and subprime auto, Dimon added, but said this was part of a “normalizing process” from a point where some institutions were “over earning.”

“If and when you have a recession, which you’re eventually going to have, you’ll have a real normal credit cycle, which I think is quite predictable,” Dimon added. “In a normal credit cycle something always does worse than normal. So this one, the obvious one is office real estate, but there’ll be a couple of other industries that probably do worse than normal this time around, too.”

Dismissing claims that IPOs from the likes of chip engineer Arm is a sign of green shoots in the sector, Dimon said the key to a successful float is taking action sooner rather than later.

“The pipeline’s like an accordion; it opens and closes over time,” he explained. “My advice to a company [if] you want to go public [or] you need to go public, don’t wait too long. I think the uncertainties out in front of us is still very large and very dangerous.”