Jamie Dimon warns of risks as S&P 500 returns nearly 10%

Jamie Dimon said investors are underestimating global economic risks and that he wouldn't buy equities or long-dated U.S. Treasuries at current prices. "I do think those risks are probably bigger than other people think," Dimon, chairman and chief executive officer of JPMorgan Chase, said in an interview with The Master Investor Podcast released Monday.

The CEO pointed to wars in Ukraine and the Middle East, tensions between the U.S. and China, and rising military spending as government deficits mount. Asked whether markets are underpricing the chance of a major shock, Dimon said it's difficult to know what risks are already reflected in asset prices. "It's possible something's baked in, but what's not baked in is what actually happens," he said.

The S&P 500 has returned nearly 10% this year as consumers continue spending and inflation moderates, while JPMorgan last week posted blockbuster quarterly results driven by surging trading and investment banking revenue. The resilience has reinforced the view that the U.S. economy has weathered recent geopolitical turmoil better than many expected.

Dimon's warning carries weight as he leads the world's largest bank by market capitalization. Persistent U.S. budget deficits will eventually force a reckoning, he said, predicting higher interest rates as so-called bond vigilantes demand greater compensation to finance the government's debt. "My view is it will become a problem," he said.

The global economy has become more resilient because of lower energy dependence than in previous decades, Dimon said, but that doesn't eliminate the possibility of a sudden inflection 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 fixed income, Dimon said he wouldn't purchase long-dated Treasuries. Even if inflation falls back to the Federal Reserve's 2% target, "the 10-year bond should probably be at 4% to 4.5%," he said, adding that he sees little upside for Treasury prices. He was similarly cautious on equities, saying he wouldn't be a buyer of the broader market at current valuations while leaving the door open for individual stock picks.

The CEO also struck a measured tone on artificial intelligence, comparing today's spending boom to the early days of the internet. "The amount of money being spent is huge. Will it in total pay off? Probably, just like the internet did," Dimon said. He noted that early internet winners such as Yahoo and Netscape faded while eventual winners such as Google and Facebook emerged later. "Will it pay off the way you expect and the timetable you expect? Definitely not," he said.

This article is for informational purposes only and does not constitute investment advice.