Jamie Dimon warns the stock market and Treasury bonds are at risk of being too expensive
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The CEO of JPMorgan Chase, Jamie Dimon, said in an interview on Monday that he will not buy stocks or long-term Treasury bonds at their current prices because he thinks that investors are not fully calculating the risks that could cause turmoil in the equity and credit markets.
Dimon said in an interview with CNBC that he thinks the national and financial risks are “probably greater than some people think” amid ongoing conflicts in Ukraine and the Middle East, as well as tensions between the US and China.
He also said that the growing budget deficit of governments around the world causes financial risks during the increase in defense spending, which may lead to higher interest rates on government bonds.
JPMorgan Chase CEO Jamie Dimon said he is cautious about stock market valuations and won't buy bonds given current rates and yields. (Caroline Brehman/Bloomberg via Getty Images)
Dimon said he would not buy long-term Treasuries given current bond market conditions, saying he thinks interest rates on US bonds will likely remain high even if inflation slows.
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The CEO of JPMorgan Chase said he believes “the 10-year bond should probably be at 4% to 4.5%” even if inflation returns to the Federal Reserve's long-term target of 2%, and said he personally won't buy long-term Treasuries and sees little upside in bond prices.
The 10-year Treasury yield is currently around 4.6% and has remained above 4.2% since March after hovering near 4% late last year.
The most recent consumer price index (CPI) data showed that inflation rose 3.5% from last year – above the Fed's target of 2% – despite a month-on-month decline as fuel prices fell as the energy market stabilized amid an easing of hostilities between the US and Iran.
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| A ticker | Security | Finally | Change | Change % |
|---|---|---|---|---|
| JPM | JPMORGAN CHASE & CO. | 338.87 | -2.23 |
-0.65% |
Stubborn inflation prompted the Fed to leave interest rates unchanged at the central bank's June meeting and Fed Chairman Kevin Warsh signaled that policymakers will not tolerate higher inflation.
That has caused the market's view of the possibility of rate cuts to decline, as the CME FedWatch tool suggests that the federal funds rate will remain firm or rise before the end of this year.
Dimon also commented on the stock market in the interview, saying that he will not invest in the broader market with the high valuations that can currently be found in many leading companies and instead will look at individual companies to find “great investments.”
Dimon likened the increase in investment in AI to the growth of the Internet. (Alexander Tamargo/Getty Images for America Business Forum)
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He also compared the impact of artificial intelligence (AI) on the market as it reshapes the technology sector and the wider economy to what happened during the early internet boom, saying companies are spending “huge” money that may not immediately lead to the desired results.
“Will it pay off completely? Maybe, like the Internet did,” Dimon told CNBC. “Will it pay off in the way you expect and the timetable you expect? Absolutely not.”
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