Jamie Dimon Warns Credit Cycle Will Be 'Worse Than Normal' — What Prediction Markets Tell Us About The Next Recession

JPMorgan (NYSE:JPM) CEO Jamie Dimon warned Monday that the next credit cycle will be “worse than a normal one” due to widespread complacency among lenders.

Speaking at JPMorgan’s Global Leveraged Finance Conference in Miami Beach, Dimon said individuals and corporations are in good shape, but governments “have far more debt than they’ve ever had before.”

“Asset prices are very high. Credit spreads are very low,” he said. “I don’t think a lot of people have seen a credit cycle. Not everyone who makes loans is very good at it.”

He pointed to bad underwriting and “more fraud than there should be” as warning signs. On domestic policy, Dimon said the “One Big Beautiful Bill” and bank deregulation could drive growth, but warned inflation may be the trade-off.

Iran Could Be The Wildcard

Dimon said the Iran conflict could spark inflation if it drags on, but expressed cautious optimism it could be a catalyst for lasting Middle East peace.

“The hope is that this might lead to a long, just peace in the Middle East. I think the odds of that are higher,” he said, while noting higher gas prices won’t be a major inflationary hit unless the situation is “prolonged.”

Bob McNally, founder of Rapidan Energy Group and former White House energy adviser, put it more bluntly: “A prolonged closure of the Strait of Hormuz is a guaranteed global recession.”

Prediction Markets Begin To Price Risk

On Kalshi, the odds of a 2026 recession hit an all-time low of 21% in late February, but have ticked back up to 25% since the Iran war began and private credit fears spread.

Unemployment odds are moving in the same direction with the chance of above 5% US unemployment this year rising from around 33% to 37%.

Eisman Sees The Same Cracks

Steve Eisman, who called the 2008 housing collapse, has been warning that the $1.8 trillion private credit market could “hurt the US economy badly” if it blows up.

He estimates over 20% of private credit is exposed to software buyout loans made at pre-AI valuations. If those companies get replaced by AI, the loans go bad.

Firms like Blue Owl Capital (NYSE:OWL), which froze retail fund redemptions last month, are already feeling the pressure. OWL is down over 30% year-to-date.

Image: Shutterstock