Xiaomo CEO Dimon “throws cold water”: Investors underestimate global risks and will never buy US stocks and long-term bonds at current prices

The Zhitong Finance App learned that J.P. Morgan Chase (JPM.US) CEO Jamie Dimon said that investors have underestimated the risks facing the global economy. At the current price level, he will neither buy stocks nor long-term US Treasury bonds.

In an hour-long interview posted late Monday, Dimon said the market did not fully reflect the growing geopolitical and fiscal threats. “I really think these risks might be greater than anyone else thought,” Dimon said.

Dimon mentioned the war in Ukraine and the Middle East, the tension between the US and China, and the rise in military spending against the backdrop of growing government deficits.

When asked if the market is underestimating the possibility of a major shock, Dimon said that it is difficult to know exactly what risks are already reflected in asset prices. He said, “Some factors may have already been digested, but what actually happens cannot be digested ahead of time.”

As the head of the world's largest bank by market capitalization, Dimon often warns the public about the financial risks he sees.

His latest remarks are in stark contrast to investors' recent willingness to ignore wars, tariffs, and other shocks. The S&P 500 has risen nearly 10% this year as consumer spending continues, inflation slows, and investors embrace AI trading.

Last week, J.P. Morgan Chase and its peers reported extremely impressive quarterly results, fueled by strong trading and investment banking revenues, further reinforcing the view that the US economy has weathered recent geopolitical turbulence better than many expected.

In an interview, Dimon acknowledged that the global economy has become more resilient because its dependence on energy is lower than in previous decades, but he warned that this does not eliminate the possibility of a sudden turning point.

He said, “You may need to put more straw on the back of a crushing camel to trigger that tipping point,” and “even the current outbreak of war may not be enough to trigger this.”

Dimon said that America's continuing budget deficit will eventually trigger a settlement and may push up interest rates. “My opinion is that this will eventually become a problem,” he predicts that interest rates will rise as so-called “bond vigilantes” demand higher compensation to finance government debt.

Stocks and the AI cycle

When asked if he would buy long-term treasury bonds, Dimon said, “Personally, I wouldn't.”

Even if the inflation rate falls back to the Fed's 2% target, “the 10-year Treasury yield should probably be around 4% to 4.5%,” he said, adding that he sees little room for treasury bond prices to rise.

He's also wary of stocks. Although if an individual stock were “a great investment,” Dimon said he wouldn't buy the market at the current valuation level.

Dimon has also taken a moderate approach to artificial intelligence, comparing today's investment boom with the early days of internet development. “The amount of money being invested is huge. Will it pay off in the end? Maybe, just like the internet did back then,” Dimon said.

He also pointed out that during the Internet boom, early big players such as Yahoo and Netscape gradually declined, while the ultimate winners such as Google and Facebook only appeared later.

“Will it pay off in the way and within the timeframe you'd expect? Absolutely not,” Damon said.