In Jamie Dimon’s America, the stock market has already voted

JAMIE Dimon was recently asked: “If you had to describe the US economy, how resilient is it?” His answer was unequivocal: “Basically, it’s booming.” It was the first time the chairman and chief executive officer of JPMorgan Chase & Co uttered such a superlative since he became the head of the world’s largest bank almost two decades ago.

“If you look at the economy” before the Covid-19 pandemic “it was very low growth for 20 years”, he told the Economic Club of New York on Apr 23. “But if you look at the economy since then, it’s been booming. Unemployment hit an all-time low; it’s been under 4 per cent now for the better part of two or three years.” That’s a sustained rate of joblessness not seen since the 68-year-old Dimon’s elementary school days. “The American consumer, even if we go into a recession, is much wealthier than before,” he said. “Debt service ratios are very low... their home prices are up; their stock prices are up.”

Dimon’s optimism on America is echoed by investors no matter where they are. JPMorgan is one of 17 US-based firms that make up the 20 most valuable companies in the world by stock market value, according to data compiled by Bloomberg.

This was not always the case: Most of their superior valuations occurred during the past three years, a period when corporate America, led by Microsoft, Apple, Nvidia and Alphabet, outperformed the rest of the world’s publicly traded equities by a margin not seen since at least 1970, data compiled by Bloomberg show.

All of this is another way of saying that confidence in the US has never been higher, as reflected in the record 26 per cent average premium investors are willing to pay for American stocks since 2021. That is more than twice the 12 per cent premium they plonked down in 2017, according to data compiled by Bloomberg.

To understand just how much the world prizes American technology, consider that US companies operating in that sector account for 112 of the 187 such firms in the MSCI World Index of developed countries, representing a record 85 per cent of the market value of the global tech industry.

None of it is accidental. The stock market, at a minimum, is what economist John Maynard Keynes might call the psychological referendum on President Joe Biden’s economic policies, known as Bidenomics.

Investors, in their enthusiasm for corporate America, tacitly accept its major achievements – the American Rescue Plan Act, the Infrastructure Investment and Jobs Act, Inflation Reduction Act and Chips and Science Act – as beneficial to the US economy.

It’s that last piece of legislation, which subsidises the manufacturing of semiconductors inside the US, that has Dimon animated on what comes next. “Technology is the thing that changes the world,” he told the Economic Club of New York. “AI will be one of those big ones.”

Not mentioned during Dimon’s discussion at midtown Manhattan’s Ziegfeld Ballroom is that the Chips and Science Act signed into law by Biden in 2022 led to almost US$150 billion of investment in US semiconductor research, development and production.

Just last week it was announced that the US plans to award Micron Technology as much as US$13.6 billion in grants and loans to help the memory-chip maker build new American factories.

The 20 semiconductor businesses among the 112 publicly traded US tech firms are poised for industry-leading sales growth of 52 per cent in 2024 and 19 per cent in 2025, according to analyst estimates compiled by Bloomberg.

Don’t be fooled thinking it’s just about tech. Included in the top 20 biggest companies in the world are conglomerate Berkshire Hathaway, drugmaker Eli Lilly, retailer Walmart, healthcare firm UnitedHealth Group, energy firm Exxon Mobil and Mastercard.

In other words, a good representation of America. All of which explains why the Business Roundtable’s survey of top CEOs and Duke University’s survey of chief financial officers both show rising confidence in the last year of Biden’s first term.

The same surveys were in steady decline under his predecessor, Donald Trump, starting in early 2018 through 2019 (excluding the Covid-19 pandemic in 2020). The latest CEO report is notable because it shows expectations of stronger sales, greater capital spending and more hiring.

“I’m very excited about the future,” Dimon said. So are the world’s investors. BLOOMBERG

The writer is editor in chief emeritus of Bloomberg News