JPMorgan CEO says global economic risks are underestimated: would not buy stocks or long-term US Treasuries at current prices

Source: Global Markets Broadcast

JPMorgan CEO Jamie Dimon stated that investors are underestimating the risks facing the global economy. He would not buy stocks or long-term US Treasury bonds at current prices.

In an interview aired late Monday local time, Dimon said the markets have not fully factored in the various emerging risks on geopolitical and fiscal fronts.

Dimon said: "I really believe these risks may be more serious than people think." He cited the conflicts in Ukraine and the Middle East, heightened geopolitical tensions, and the continuous rise of military spending amid high government deficits in multiple countries.

When asked if the markets are underestimating the likelihood of significant shocks, Dimon said it is difficult to know precisely which risks have already been priced into various assets.

He said, "The market may have priced in some potential risks, but in reality, the surprises that actually occur are often those that have not been priced in."

Dimon leads the world's largest bank by market capitalization and often publicly warns about various economic risks he observes.

His latest remarks sharply contrast with the recent optimism among investors, who have ignored wars, tariffs, and other shocks. This year, as consumers continue spending, inflation eases, and investors embrace the artificial intelligence sector, the S&P 500 Index has gained nearly 10% so far.

Last week, JPMorgan and its Wall Street peers posted strong quarterly earnings, primarily due to a significant increase in trading and investment banking revenue. This further supported the view that the US economy has proven more resilient to recent geopolitical turmoil than many expected.

In his latest interview, Dimon acknowledged that the global economy has become more resilient due to less dependence on energy compared to previous decades, but he warned this does not rule out the possibility of a sudden inflection point.

He said, "It might take more straws to break the camel's back. Even if the current conflict escalates further, it still may not be enough to trigger a tipping point."

Dimon said that the persistently high US fiscal deficit will eventually have to be reckoned with, at which point interest rates are likely to move higher.

"In my opinion, this will become a problem sooner or later." He predicted that the so-called "bond vigilantes" will demand higher returns to finance government debt, which in turn will drive up interest rates.

When asked about this, Dimon said he would not buy long-term US Treasuries: "Personally, I wouldn't," he said.

Even if inflation drops to the Federal Reserve's 2% target, "the 10-year bond yield probably should be in the 4% to 4.5% range," he said, adding that he expects almost no upside for Treasury prices.

He is also cautious about stocks. While he would consider certain individual stocks if they are "an extraordinary investment," Dimon said he would not enter the broader market at current valuation levels.

Dimon is equally cautious about artificial intelligence, comparing the current spending boom to the early days of the Internet.

"The amount of money being spent is enormous. Will all the money be recouped? Very likely, just like the Internet," Dimon said.

He also pointed out that during the Internet bubble, early leading companies like Yahoo and Netscape gradually faded, while final winners such as Google and Facebook emerged later.

Dimon said: "But the returns will not come on the scale or at the time you expect, that's for sure."