In JPMorgan Chase‘s (NYSE: JPM) second-quarter earnings conference call, CEO Jamie Dimon said that in the U.S., the COVID-19 pandemic is “in the rearview mirror, hopefully.” Is he right? In this Fool Live video clip, recorded on July 14, Fool.com contributors Matt Frankel, CFP, Brian Withers, and Toby Bordelon discuss whether Dimon is right, or if investors should still be concerned about the pandemic’s effects.
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Brian Withers: Jamie Dimon, CEO of JPMorgan, released earnings yesterday. I know, Matt, you always love to listen to these earnings calls because Jamie Dimon has a little bit broader perspective than just what’s going on at his company. The headline here is JPMorgan’s Jamie Dimon says the U.S. consumer is raring to go. Here’s a quote from the conference call: “Their house value is up, their stock value is up, their incomes are up, their savings are up, their confidence is up. The pandemic is in the rearview mirror, hopefully.” said Jamie Dimon on Tuesday in the call. They are raring to go. Well, I don’t know if I completely agree with Jamie Dimon that the pandemic is behind us. But I’m going to throw it out to you guys. If it’s not behind us, what are you looking at to know that we are clear? Toby, why don’t you take this one first.
Toby Bordelon: Yeah. Look, I don’t think it’s really behind us, at least not for everyone. It may feel like it is. In many cases, we’re opening up. I think there’s a nuanced look at this. If you look at the U.S., I think, practically, we are pretty much done for now in many places. But the big issue is we’ve still got a lot of unvaccinated people. The delta variant is spreading pretty rapidly, still killing people. People are still dying because we had another death today where I live in Washoe County [Nevada]. The risk here is that the spread, this high spread of Delta variant is going to lead to another mutation that’s more resistant to the current vaccines, then we backslide a little bit. We need to get our vaccination rates up. I think that’s a key. I think that’s what I’m looking at. Vaccination rates keep getting higher, it’s going to be better and better. You look at other countries, their issue there is they just don’t have the same access that we do. Things can be pretty bad in some parts of the world. We need to get vaccinations out to those countries that need them so they can start protecting their people. As far as Jamie Dimon, he’s right when you consider the economy’s reopening rate, that is happening. But the risk I see is that, look, if we don’t start increasing vaccinations worldwide, not just the United States, come fall, we could see some serious backsliding either because of new variants or just because things keep circulating. I think that’s a risk that people really don’t appreciate right now. It’s still out there, and it could come back to us and surprise us in a bad way if we don’t really make a push here. But we’re in a much better place than where we were last year. It’s obviously the case and let’s celebrate that.
Matt Frankel: Yeah. The term pandemic means that it’s global. It’s declared a global pandemic by the World Health Organization. I think to say that the pandemic is in the rearview is a little insensitive in ways. Go tell people in India that the pandemic is over. But having said that, when Jamie Dimon says something, I tend to listen because he is one of the most knowledgeable and influential CEOs in the business. I’d say next to Warren Buffett, he is probably the most-read annual letter in all of finance. I sort of agree with what he’s saying. He’s definitely right like Toby said. When it comes to personal finance, consumer demand, things like that, there’s a ton of cash on the sidelines. Savings rates were up dramatically during the pandemic. People didn’t have anything to spend money on, so they stuck it in their savings account, which you see during uncertain times. Consumers are spending. Brian Moynihan, another bank CEO from Bank of America (NYSE: BAC), said that consumer spending is up 20% over pre-pandemic levels. Financially, yes, it could be a little bit in the rearview, but on the other hand, the delta variant, it scares me. I’ve got to be honest. I live in unvaccinated country down here. I have my vaccine, but the cases have spiked over 50% week over week in South Carolina. Now, it’s going to be a tough sell trying to get the U.S. to shut down anything, especially now that you hear the CDC saying that virtually all, meaning more than 99%, of hospitalizations and deaths, are in unvaccinated people, and vaccines are readily available in the U.S. So it’s going to be a tough sell to the American public to try to shut anything down again, and don’t forget the international aspect of it. The U.S. economy depends a lot on international consumption, especially tourism. I know, when I worked in a Florida hotel a lifetime ago, during the summer, especially, all of our business was European. The international travel is just not really happening right now. There are parts of the economy that where it’s not in the rearview.
Withers: Yeah, Matt. I’m reminded of the state of our vaccines and the whole population. We go to the Rock Gym a couple of times a week during the week, and it’s in the summer here, so kids are at summer camp and they’re visiting the Rock Gym. Well, all of them have masks on. These are 6- through 8-year-olds kind of thing. All of the adults that are hanging out with them also have masks on. I look around the neighborhood or look through the grocery store, and I still see many adults wearing masks. They are typically ones that have families and ones that have kids that haven’t been able to get the vaccine yet. Things getting back to normal, I’m still reminded that offices may not be back in. People may not be back at the office yet, and certainly, kids getting back to school. I know my son Zack is looking forward to get back in the classroom at the community college, but he hasn’t been able to sign up for classes yet. I’m wondering whether they are having trouble lining up teachers for all the sessions that they want to do. I’m with you guys. I’m a little worried about the fall when everybody gets back to school, and there’s a bunch of kids that are in groups, both K through 12 and in college potentially, that are unvaccinated and what can happen there. Matt, you bring up the whole global piece of this thing, and the global supply chain is still what I’ll call disheveled. It’s not flowing normally with countries at different points coming out of the pandemic. We talked last week, I think, about the estimate for supply lines from Asia getting back to normal isn’t going to come back to normal until January or February after the holiday season. The other piece that I’m seeing is restaurants are experiencing labor shortages. As much as people want to get out and spend, supply chains are limited, restaurants don’t have the labor. This holiday season is going to be a little nutty as people have pent-up demand, and there aren’t necessarily things to buy. It’ll be interesting. But I hope to see a gradual improvement and hope that things don’t resurge. But I think it’s probably nine months to a year to get back to things normal and whatever the new normal is.
Frankel: You’ve mentioned supply chain disruptions. Go tell a new-car dealer that the pandemic is over. My dad’s looking for a new car right now. He went to the Toyota (NYSE: TM) dealership, and they told him literally they didn’t have anything for him to test drive.
Frankel: Go tell them the pandemic is in the rearview. Someone, I forget who was on CNBC, but they were absolute genius whoever they were. At the early days of the pandemic, they said the reopening is going to be harder than shutting things down, and they were 100% right.
Bank of America is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Brian Withers has no position in any of the stocks mentioned. Matthew Frankel, CFP owns shares of Bank of America. Toby Bordelon has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.