JPMorgan Chase CEO says he would avoid stocks and long-term US bonds despite market optimism

Why Dimon is staying away from stocks and bonds

Dimon said he would not buy long-dated US Treasury bonds because he believes they offer little upside. Even if inflation returns to the Federal Reserve’s 2% target, he expects the 10-year Treasury yield to remain between 4% and 4.5%.When asked if he would buy long-term Treasurys, Dimon replied, “Personally, no.”

He also said he is not interested in buying the overall stock market at current valuations. While he would still consider investing in a company if it was “a great investment,” he would avoid broad equity markets for now.

Investors are underestimating global risks

Dimon said financial markets are not fully pricing in the risks facing the global economy. He pointed to the wars in Ukraine and the Middle East, growing tensions between the US and China, rising military spending and increasing government debt.

“I do think those risks are probably bigger than other people think,” Dimon said. He added that while some risks may already be reflected in market prices, no one can predict how future events will unfold. “It’s possible something’s baked in, but what’s not baked in is what actually happens,” he said.

Budget deficits could push interest rates higher

Dimon warned that the US government’s rising budget deficits will eventually create problems for the economy. He believes investors will demand higher returns to finance government borrowing, which could push interest rates even higher. “My view is it will become a problem,” he said.

Strong markets do not remove the risks

Dimon’s comments come even as US markets continue to perform well. The S&P 500 has gained nearly 10% this year, helped by easing inflation, steady consumer spending and strong excitement around artificial intelligence.

Last week, JPMorgan and several other major banks also reported strong quarterly earnings, driven by robust trading and investment banking businesses. These results have strengthened confidence that the US economy has handled recent geopolitical tensions better than many expected. Still, Dimon said that does not mean the risks have disappeared.

He noted that the global economy is more resilient today because countries are less dependent on energy than in the past. However, he warned that a major turning point could still happen if enough pressures build up.

“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.”

Dimon sees AI like the early internet

Dimon also spoke about the rapid growth of artificial intelligence, comparing it to the internet boom. “The amount of money being spent is huge. Will it in total pay off? Probably, just like the internet did,” he said.

However, he warned that today’s biggest AI companies may not necessarily become the long-term winners. He noted that companies such as Yahoo and Netscape were early internet leaders but later lost out to Google and Facebook. “Will it pay off the way you expect and the timetable you expect? Definitely not,” Dimon said.