JPMorgan Chase CEO Jamie Dimon warned that financial markets are failing to fully account for the dangers confronting the world economy, and that he personally would steer clear of both stocks and long-dated U.S.
Treasurys at today’s prices, according to CNBC
Dimon made the comments in an interview with the Master Investor Podcast with Wilfred Frost, recorded July 16 and released Monday. “I do think those risks are probably bigger than other people think,” he said, citing the ongoing conflicts in Ukraine and the Middle East, U.S.-China tensions, and an increase in military expenditure at a time when government deficits are expanding. On Treasurys, Dimon said he sees little reason to own long-dated government debt. “Even if inflation was 2%, the 10-year bond should probably be at 4-4.5%,” he said, noting that rates are close to that level already and adding, “I don’t understand what the upside is.” He said inflation has run above 3% for nearly five years. Dimon was similarly cautious on equities.
While he said he would consider an individual stock that represented a strong opportunity, he would not be a buyer of the broader market at current valuations, according to CNBC. He acknowledged the global economy has grown more resilient — partly because of lower energy dependence than in previous decades — but warned that resilience does not rule out a sudden shift. “You may need more straws in the camel’s back to cause that tipping point,” he said. On government debt loads, Dimon said persistent U.S. budget deficits would eventually drive interest rates higher as bond markets demand greater compensation to finance the debt. “My view is it will become a problem,” he said.