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JPMorgan CEO Jamie Dimon warned that stocks are overvalued.
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Dimon sees lingering risks including inflation, government deficit spending, and geopolitical tensions.
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Dimon’s comments echo a recent warning from Goldman Sachs that the market is “priced for perfection.”
JPMorgan CEO Jamie Dimon sounded the alarm on stocks in an interview today on the World Economic Forum in Davos, Switzerland, saying that the market looks overvalued.
“Asset prices are sort of inflated, by any measure,” Dimon told CNBC in Davos. He added that “they’re in the highest 10% or 15%” of historical valuations.
The S&P 500 is lower than 1% away from hitting a record high, and elevated valuations have been a trademark of the present bull market rally that began in October 2022.
The S&P 500 is trading at a forward price-to-earnings multiple of 21.6x, which is above its five-year and 10-year average of 19.7x and 18.2x, respectively.
Dimon said many things must go right for the stock market to proceed its record run.
“They’re elevated, and you would like fairly good outcomes to justify those prices. Having pro-growth strategies helps make that occur, but there are negatives on the market, and so they can are likely to surprise you,” Dimon said.
A number of the “negatives” that concern Dimon include the potential for a rebound in inflation, ongoing risks from government deficit spending, and ongoing geopolitical risks.
“What I’m a little bit cautious about is the deficit spending; it’s a worldwide issue, not only an American issue,” he said. “And the related [question], ‘Will inflation go away?’ I’m not so sure.”
Dimon’s cautious comments come as the brand new Trump administration unleashes “animal spirits” that have helped spark a rally within the stock market.
Stanley Druckenmiller, a top hedge fund investor, used the term in an interview with CNBC on Monday. He said that in his 49-year profession, he’s never seen such an about-face in Washington, DC, from the perceived anti-business stance of the Biden administration to the pro-business stance of the Trump administration.
“We do a whole lot of talking to CEOs and firms on the bottom, and I’d say CEOs are somewhere between relieved and giddy,” Druckenmiller said. “So we’re a believer in animal spirits.”
But Dimon is not the just one with a cautious view of the stock market.
A recent note from strategists at Goldman Sachs suggested that the stock market is “priced for perfection.”
The bank said it sees the stock market as increasingly vulnerable to a correction this yr, especially given the historically high valuations and concentration in a handful of stocks.