- Hedge fund manager Steve Cohen warns that tariffs, slowing immigration, and DOGE cost-cutting could lead to a market correction and slower economic growth. Meanwhile, JPMorgan CEO Jamie Dimon suggests that while tariffs and government inefficiencies pose risks, their ultimate impact depends on execution, and he prefers a wait-and-see approach.
While Wall Street is happily watching as the S&P 500 continues to trickle higher in 2025, billionaire hedge fund manager Steve Cohen is concerned the good times won’t last.
The man worth $14.8 billion courtesy of his ownership of Point 72 Asset Management—as well as the New York Mets—said the outlook for the U.S. economy moving forward is uncertain, in part because of the tariff plan laid out by President Donald Trump.
Since Trump’s inauguration a little over a month ago, economic policy has yo-yoed between threats of import tariffs on the likes of Mexico and Canada, to eleventh-hour delays when terms were agreed upon.
Meanwhile the White House plowed ahead with its tariff hike on China, possibly launching a tit-for-tat war with the world’s second-largest economy.
This could mark a tipping point for market correction, Cohen warned. It’s a shift the more bearish on Wall Street have long feared, citing overvaluation of stocks.
Speaking at the FIIPRIORITY conference in Miami on Friday, Cohen said: “I think this is one of those moments where there’s really a lot of uncertainty and I have pretty strong views here.
“Tariffs cannot be positive, I mean it’s a tax. And you can imagine tit for tat if the U.S. does something—it implements a tax on somebody—somebody else is going to perhaps raise the stakes and raise their tax back. Taxes are never positive.”
He continued: “On top of that we have slowing immigration, which means the labor force will not grow as rapidly as…over the last five years.
“And in addition now you have [the Department of Government Efficiency, DOGE]. Wherever you lay on the DOGE issue that’s austerity, and austerity when that money’s been coursing through the economy over many years and now potentially will be reduced or stopped in many ways has got to be negative for the economy.”
The outlook from Point72 is now that economic growth in the second half of the year will fall from 2.5% to 1.5%—though unemployment will also fall because of a tighter labor force.
“There may be offsets in DOGE and that needs to be considered but the reality is you’ve got a brew of sticky inflation, slowing growth and austerity in the government. So I’m actually pretty negative for the first time in a while,” Cohen continued.
While Cohen said the outcome wouldn’t be “disastrous” and the dip may only last a year, he added, “I think the best gains have been had and it wouldn’t surprise me to see a significant correction.”
A significant correction has been on the cards for the likes of Morgan Stanley CIO Mike Wilson since as early as 2023, when he warned that investors had chased stocks upwards beyond the value of their fundamentals. A rapid descent will have “catastrophic consequences” he added.
Dimon’s wait-and-see approach
Meanwhile at JPMorgan, CEO Jamie Dimon is somewhat more upbeat and is waiting to see how the tariff battle plays out.
Dimon, known for his meticulous planning and risk profiling across a range of economic outcomes, was asked directly about Cohen’s take by CNBC yesterday and conceded that policies like tariffs do have the potential to weigh on the economy.
However, he added, “The economy’s like this huge ship of state and these things at the margin may not change that ship of state, and also it really depends the quality with which they’re done.
“More effective, efficient government…isn’t bad, it’s actually a good thing. Tariffs properly used—if they’re overused, if there’s retaliation yeah that could be bad for the economy but this…used for negotiations making up for unfair trade. I’m more of a wait-and-see attitude about how all this plays out.”
Like Cohen, the Wall Street veteran paid $39 million for his work in 2024 distanced himself from being either for or against Elon Musk’s DOGE project, but had a more upbeat overall outlook.
“It’s too binary to say support or not,” Dimon said. “Here’s what I support: The government and most [people] know the government’s inefficient, not very competent and it needs a lot of work. It’s not just waste…it’s outcomes: Why are we spending these things? Are we getting what we deserve? What should we change?”
The Tesla CEO has been tasked with cutting a trillion dollars out of federal government be it through axing headcount, reducing spending or identifying efficiencies where staff can deliver more.
So far some DOGE policies have proved at worst mistaken and at best controversial. This, Dimon added, is somewhat to be expected: “Bureaucracy pushes back at everything… you have to be strong if you’re going to do it. I’m hoping they’ll be quite successful.”
But the man known for running the world’s biggest bank with a military tactic known as the OODA loop isn’t taking any chances, he added: “It’s very early stages to tell exactly what it’s going to mean and how it’ll effect the economy.”
