Jamie Dimon sounds the alarm on stocks, says the market is looking 'kind of inflated'
CNBC/Jamie Dimon
- JPMorgan CEO Jamie Dimon warned that stocks are overvalued.
- Dimon sees lingering risks including inflation, government deficit spending, and geopolitical tensions.
- 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 at the World Economic Forum in Davos, Switzerland, saying that the market looks overvalued.
"Asset prices are kind of inflated, by any measure," Dimon told CNBC in Davos. He added that "they are in the top 10% or 15%" of historical valuations.
The S&P 500 is less than 1% away from hitting a record high, and elevated valuations have been a hallmark of the current 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 have to go right for the stock market to continue its record run.
"They're elevated, and you need fairly good outcomes to justify those prices. Having pro-growth strategies helps make that happen, but there are negatives out there, and they can tend to surprise you," Dimon said.
Some 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 cautious about is the deficit spending; it's a global issue, not just 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 new Trump administration unleashes "animal spirits" that have helped spark a rally in 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 career, 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 lot of talking to CEOs and companies on the ground, and I'd say CEOs are somewhere between relieved and giddy," Druckenmiller said. "So we're a believer in animal spirits."
But Dimon isn't the only 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 year, especially given the historically high valuations and concentration in a handful of stocks.
"Looking at individual markets, the US has a valuation at its 20-year peak, and this remains true even if we exclude the largest technology companies," Goldman Sachs said. "This combination of performance over recent months and high valuations implies lower returns than in 2024."
This isn't the first time Dimon has struck a cautious tone on the stock market. Over the past three years, he has repeatedly warned of a potential economic "hurricane" hurting the market, though his prediction has yet to be realized.