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The CEO of JPMorgan, Jamie Dimon, warned that stocks are too valuable.
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Dimon sees continuing risks including inflation, government deficit spending, and political discord.
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Dimon’s comments echo a recent warning from Goldman Sachs that the market is “fully priced.”
The CEO of JPMorgan, Jamie Dimon, flagged the stock in an interview today at the World Economic Forum in Davos, Switzerland, saying that the market looks very important.
“Commodity prices are like going up, by any measure,” Dimon told CNBC in Davos. He added that they are “above 10% or 15%” of historical figures.
The S&P 500 is less than 1% from a new high, and higher prices have been the hallmark of the current bull market rally that began in October 2022.
The S&P 500 trades at 21.6x forward earnings, which is higher than its five-year and 10-year averages of 19.7x and 18.2x, respectively.
Dimon said many things have to go right for the stock market to continue its record.
“They’re up, and you need good results to support those prices. Having strategies to increase growth helps make that happen, but there are negatives out there, and they can surprise you,” Dimon said.
Other “bad” concerns for Dimon include the possibility of re-inflation, continuing risks from government deficits, and country risk.
“What I’m less aware of is deficit spending; it’s a global issue, not just an American issue,” he said. “And related [question]’Will inflation ever end?’ I’m not so sure.”
Dimon’s cautious comments come as the new Trump administration has released the “animal spirits” that helped fuel the rally in the stock market.
Stanley Druckenmiller, a senior hedge fund investor, used the term in an interview with CNBC on Monday. He said in his 49-year career, he has never seen a situation like this in Washington, DC, from the perceived anti-business stance of the Biden administration to the pro-business nature of the Trump administration.
“We talk a lot with CEOs and companies on the ground, and I’d say CEOs are somewhere between comfortable and negative,” Druckenmiller said. “So we believe in animal spirits.”
But Dimon isn’t the only one with a cautious view of the stock market.
A recent note from Goldman Sachs strategists suggested that the stock market is “priced to perfection.”
The bank said it sees the stock market as increasingly vulnerable to corrections this year, especially given historically high valuations and a focus on a few stocks.
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