Finance

'Worse than people expect': Jamie Dimon gives a dire warning about the next credit crisis — here's what big bank earnings show

Moneywise · Jul 22, 2026 10:45 · 9 min read

Dimon warns credit crisis may be 'worse than people expect'

The banks did well in Q1 of 2026, but JPMorgan Chase's CEO warns the next credit cycle might not be so kind.

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Despite — or maybe because of — volatile markets and increasing consumer costs, the nation's largest banks continued to post strong profits in their second-quarter earnings, showing that the banking sector remains resilient even as concerns about the economy persist (1). But JPMorgan Chase, at least, is still preparing for a possible recession.

During JPMorgan’s earnings call earlier this year, Chairman and CEO Jamie Dimon declined to predict whether the U.S. was heading for a recession (2); however, he has repeatedly warned that whenever the next credit cycle arrives, losses on leveraged lending are likely to be "worse than people expect relative to the scenario."

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Here’s why JPMorgan is preparing for hard times, plus some other takeaways from the big banks’ latest earnings reports.

Volatile markets are good for big bank trading

Many of the nation’s largest banks have continued to report strong earnings, with trading revenue benefiting from periods of elevated market activity and investor uncertainty.

When markets get choppy, it can create more opportunities for banks’ trading desks as investors buy, sell and adjust their portfolios in response to changing conditions. But that same volatility can also be a warning sign for everyday investors, since it often comes with bigger swings in stock prices and more uncertainty about where the economy is headed.

But trading wasn’t the only area where banks saw revenue increases, as many saw double-digit growth from wealth management.

Bank of America credited their 12% increase in global wealth and investment management revenue to “higher asset management fees, up 15% to $4.2 billion, reflecting higher market valuations and strong assets under management flows” (5).

In other words, the bank was overseeing more client assets, helped by higher market valuations and continued investment flows.

JPMorgan is preparing for the next recession to be worse than average

One of the topics Dimon discussed is the credit cycle, which is the idea that credit goes through periodic expansions and contractions (6).

During expansion, more people take out loans or other forms of credit and those loans are good quality — people are less likely to be delinquent with their payments. During contraction, however, fewer people are taking loans and more people are falling behind.

Contractions in a credit cycle are often (but not always) tied to recessions. They’re also worse for the banks’ bottom lines. Dimon, however, didn’t explicitly say that he thinks a recession is coming in the quarterly earnings call.

“I’m not forecasting anything,” Dimon said (2). “I’m simply saying, for JP Morgan, we have to be prepared for a recession and that you could have stagflation. Obviously, if you have stagflation and higher rates for longer and credit spreads gap out, that will put a lot of stress and strain on leveraged companies as they refinance.”

In a recent letter to shareholders (7), Dimon expanded on that warning, saying he believes that “when we have a credit cycle, which will happen one day, losses on all leveraged lending in general will be higher than expected.” He also says that private credit isn’t very transparent, which means people will sell based on predictions rather than actual losses.

Some of those risks are already starting to show up (7).

Companies and consumers that took on debt when interest rates were much lower are now facing a tougher reality as loans come due and borrowing costs stay elevated.

Rising credit card and auto loan delinquencies also suggest some households are beginning to feel the squeeze: Auto loan balances increased by 18 billion, to $1.69 trillion in the first quarter of this year, according to the Federal Reserve Bank of New York (8).

How you can prepare your wallet for a potential recession

Although the labor market has remained relatively healthy, hiring has slowed in many industries, meaning workers who lose their jobs could take longer to find new employment if the economy weakens (9).

The common advice is to save three to six months of expenses in your emergency fund, but it might be a good idea to save even more if you’re worried about high unemployment rates.

Some financial experts even recommend saving up to a year’s worth of expenses so you can, hopefully, weather the economic fallout of a down cycle.

Earn interest on your emergency savings

Parking your emergency funds in a high-yield account can allow your cash to work harder for you behind the scenes.

A high-yield account like a Wealthfront Cash Account can be a great place to grow your uninvested cash, offering both competitive interest rates and easy access to your money when you need it.

A Wealthfront Cash Account currently offers a base APY of 3.30% through program banks and new clients can get an extra 0.75% boost during their first three months on up to $150,000 for a total variable APY of 4.05%.

That’s eight times the national deposit savings rate, according to the FDIC’s February report.

Additionally, Wealthfront is offering new clients who enable direct deposit ($1,000/monthly minimum) to their Cash Account and open and fund a new investment account an additional 0.25% APY increase with no expiration date or balance limit, meaning your APY could be as high as 4.30%.

With no minimum balances or account fees, as well as 24/7 withdrawals and free domestic wire transfers, your funds remain accessible at all times. Plus, you get access to up to $8 million FDIC Insurance eligibility through program banks.

From here, you can access your emergency funds in the event of an unexpected job loss, medical emergency or sudden shift in your financial situation.

Don’t try to predict the market

Dimon says it’s hard to predict which industry will be hit the hardest by a recession.

This means that knowing whether a specific company or set of companies in your portfolio will tank — and leave a significant hole in your investments — can be difficult.

That’s why legendary investor Warren Buffett recommends a far simpler approach — investing in index funds.

“The trick is not to pick the right company. The trick is to essentially buy all the big companies through the S&P 500 and to do it consistently and to do it in a very, very low-cost way,” Buffett told CNBC in 2017 (10).

When markets feel uncertain, it’s natural to want to make a move. But reacting to every headline and trying to time the market can do more harm than good, especially when it comes to long-term investing.

With economic uncertainty weighing on investors, trying to time the market or make a lump-sum investment could feel like a gamble.

Investing smaller amounts on a regular basis, regardless of what headlines say, might be a better approach. Even small, consistent contributions — like spare change automatically invested from everyday purchases — can steadily grow over time through the power of compounding.

For instance, investing $20 each week for 30 years could help you build a portfolio worth more than $179,000, assuming an annual return of 10% — a hypothetical example based on long-term stock market performance, not a guaranteed result (11).

Planting the seed of an investment

If this approach appeals to you, tools like Acorns make it easy to stay consistent by investing your spare change in the background — no heavy lifting required.

Signing up for Acorns takes just minutes: All you have to do is link your cards and Acorns will round up each purchase to the nearest dollar, investing the difference — your spare change — into a diversified portfolio of ETFs managed by experts at leading investment firms like Vanguard and BlackRock.

With Acorns, you can invest in an index ETF with as little as $5 — and, if you sign up today, Acorns will add a $20 bonus to help you begin your investment journey. All you have to do is set up a small recurring deposit, which you can scale up when you want.

Diversify your portfolio

One of the easiest ways to protect your portfolio from the unexpected is by spreading your money across different types of investments. That way, if one company, industry or part of the market takes a hit, your entire nest egg isn’t riding on that one bet.

When markets get rocky, some investors look to gold as a potential source of stability. The precious metal has long been viewed as a safe haven during periods of inflation, geopolitical uncertainty and market turbulence.

Gold has also delivered strong returns in recent years, though investors should remember that even traditionally defensive assets can fall in value and may not perform well in every market environment.

Going for gold

If you’re looking to get in on the gold rush, you can actually combine the inflation-resistant properties of the precious metal with the tax advantages of an IRA by opening a gold IRA with the help of Priority Gold.

Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account, combining the tax advantages of an IRA with the protective benefits of investing in gold, making it an attractive option for those looking to hedge their retirement funds against economic uncertainty.

To learn more, you can get a free information guide that includes details on how to get up to $10,000 in free silver upon making a qualifying purchase. That way you can make sure that gold is a good fit for you and your portfolio.

Spreading your risk with real estate

Another way to spread your risk is through real estate.

Unlike stocks, property values and rental income don’t always move in lockstep with the broader market, which can help balance out volatility. Real estate — especially the prime variety — tends to continue to perform during periods of inflation. Everyone needs a place to live, after all.

And thanks to online platforms like Arrived, you can now invest a portion of your portfolio in real estate without having to worry about the added headaches of being a landlord.

Backed by world-class investors, including Jeff Bezos, Arrived allows you to invest in shares of vacation and rental properties, earning a passive income stream without the extra work that comes with being a landlord of your own rental property.

To get started, simply browse through their selection of vetted properties, each picked for their potential appreciation and income generation. Once you choose a property, you can start investing with as little as $100 and potentially earn monthly dividends.

One of the biggest perks of real estate platforms like Arrived is flexibility.

Unlike selling a home — which can be time-consuming and stressful — you can typically exit your investment much more quickly. Investors with Arrived gain access to their newly launched secondary market, where they can buy and sell shares of individual rental and vacation rental properties directly on the platform every quarter.

The best part? For a limited time, when you open an account and add $1,000 or more, Arrived will credit your account with a 1% match.

— With files from Kit Pulliam.

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'Worse than people expect': Jamie Dimon gives a dire warning about the next credit crisis — here's what big bank earnings show

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Volatile markets are good for big bank trading

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