Dimon says markets underprice fiscal and geopolitical risk

JPMorgan Chase Chief Executive Jamie Dimon said investors are not assigning enough weight to geopolitical and fiscal risks, and said he would not buy either broad equities or long-dated US Treasurys at current prices. His comments, made in an hourlong interview with Wilfred Frost released Monday, come as the S&P 500 has gained nearly 10% this year, according to CNBC, helped by consumer spending, easing inflation and enthusiasm for artificial intelligence-linked companies.

Dimon pointed to the wars in Ukraine and the Middle East, strained relations between the US and China, and higher defence spending at a time of expanding government deficits. “I do think those risks are probably bigger than other people think,” he said in the interview.

Asked whether markets are failing to price the risk of a severe disruption, Dimon said it is hard to identify precisely what is already reflected in asset prices. “It’s possible something’s baked in, but what’s not baked in is what actually happens,” he said.

Deficits and Treasury pricing

Dimon said persistent US budget deficits would eventually create problems and could push interest rates higher. He said so-called bond vigilantes may demand higher compensation to hold government debt. In bond markets, higher required yields generally mean lower prices for existing bonds, especially those with longer maturities, because their fixed payments become less attractive as market rates rise.

When asked if he would buy long-dated US Treasurys, Dimon answered: “Personally, no.” He said that even if inflation returns to the Federal Reserve’s 2% target, the 10-year Treasury yield “should probably be at 4% to 4.5%,” and added that he saw limited upside in Treasury prices.

Dimon also expressed caution on stocks at current valuations. He said he might consider an individual company if it represented “a great investment,” but would not buy the broader equity market at prevailing prices.

The remarks contrast with investors’ recent tolerance for shocks including wars and tariffs. CNBC reported that large US banks, including JPMorgan Chase, posted strong quarterly results last week, supported by trading and investment banking revenue. Those results added to the view among some investors that the US economy has handled recent global disruptions better than expected.

AI spending compared with internet boom

Dimon described the global economy as more resilient than in earlier decades, partly because of lower dependence on energy. He cautioned, however, that resilience does not rule out a sudden turning 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.”

On artificial intelligence, Dimon compared the current investment cycle with the early internet era. “The amount of money being spent is huge. Will it in total pay off? Probably, just like the internet did,” he said.

He also noted that some early internet leaders, including Yahoo and Netscape, lost prominence while later companies such as Google and Facebook became dominant. “Will it pay off the way you expect and the timetable you expect? Definitely not,” Dimon said.

Dimon leads JPMorgan Chase, which CNBC described as the world’s largest bank by market capitalisation. He has often used public appearances to warn about economic and market risks, according to CNBC.

This story draws on original reporting from CNBC.