Jamie Dimon, CEO of JPMorgan Chase, stated in an interview released late Monday that investors are underestimating risks facing the global economy and that he wouldn't purchase either equities or long-dated U.S. Treasurys at their current prices. Dimon cited geopolitical threats including wars in Ukraine and the Middle East, U.S.-China tensions, and rising military spending amid mounting government deficits as factors markets aren't fully accounting for. His comments contrast with recent market performance, as the S&P 500 has returned nearly 10% this year and JPMorgan Chase and its peers posted blockbuster quarterly results last week powered by surging trading and investment banking revenue.
Dimon Identifies Geopolitical and Fiscal Risks Markets Are Underpricing
In the hourlong interview with Wilfred Frost, Dimon stated that markets aren't fully accounting for a growing list of geopolitical and fiscal threats. "I do think those risks are probably bigger than other people think," Dimon said, pointing to wars in Ukraine and the Middle East, tensions between the U.S. and China, and rising military spending in a time of mounting government deficits.
When asked whether markets are underpricing the chance of a major shock, Dimon said it's difficult to know exactly what risks are already reflected in asset prices. "It's possible something's baked in, but what's not baked in is what actually happens," he said.
Dimon, who leads the world's largest bank by market cap, acknowledged in the interview with "The Master Investor Podcast" that the global economy has become more resilient because of lower energy dependence than in previous decades, but warned that doesn't eliminate the possibility of a sudden inflection point. "You may need more straws in the camel's back to cause that tipping point," he said. "Even this current war starting up again, maybe that's not enough to do it."
Persistent U.S. budget deficits will eventually force a reckoning, potentially driving interest rates higher, Dimon said. "My view is it will become a problem," he said, predicting higher interest rates as bond vigilantes demand greater compensation to finance the government's debt.
JPMorgan CEO Declines to Buy Treasurys or Stocks at Current Valuations
When asked, Dimon said he wouldn't purchase long-dated Treasurys. "Personally, no," he said. Even if inflation falls back to the Federal Reserve's 2% target, "the 10-year bond should probably be at 4% to 4.5%," he said, adding that he sees little upside for Treasury prices.
He was similarly cautious on stocks. While he would consider an individual stock if it was "a great investment," Dimon said he wouldn't be a buyer of the broader market at current valuations.
Dimon Compares AI Spending Boom to Early Internet Era
Dimon struck a measured tone on artificial intelligence, comparing today's spending boom to the early days of the internet. "The amount of money being spent is huge. Will it in total pay off? Probably, just like the internet did," Dimon said.
He pointed out that during the internet boom, big early players such as Yahoo and Netscape faded while eventual winners such as Google and Facebook emerged later. "Will it pay off the way you expect and the timetable you expect? Definitely not," Dimon said.
FAQ
What did Jamie Dimon say about buying stocks and Treasurys at current prices?
Jamie Dimon stated in an interview released late Monday that he wouldn't purchase either equities or long-dated U.S. Treasurys at their current prices. He said he wouldn't be a buyer of the broader stock market at current valuations, though he would consider an individual stock if it was "a great investment." On Treasurys, he said "personally, no" when asked if he would buy long-dated bonds.
Why does Dimon believe markets are underestimating risks?
Dimon cited geopolitical threats including wars in Ukraine and the Middle East, tensions between the U.S. and China, and rising military spending amid mounting government deficits. He stated "I do think those risks are probably bigger than other people think" and warned that persistent U.S. budget deficits will eventually force a reckoning, potentially driving interest rates higher.
What is Dimon's view on the 10-year Treasury bond yield?
Dimon stated that even if inflation falls back to the Federal Reserve's 2% target, "the 10-year bond should probably be at 4% to 4.5%." He added that he sees little upside for Treasury prices and predicts higher interest rates as bond vigilantes demand greater compensation to finance the government's debt.
