Key takeaways
- JPMorgan Chase CEO Jamie Dimon said Wednesday that the U.S. stock market is “kind of bloated,” one reason he is less optimistic than some of his peers about the economic outlook.
- President Donald Trump on Monday inherited the most expensive stock market in U.S. history, as measured by the Shiller P/E ratio.
- Dimon said geopolitics and government deficits were two additional reasons he was concerned, and argued that pro-growth policies offered governments the only way out of the debt burden.
JPMorgan Chase CEO Jamie Dimon said Wednesday that the U.S. stock market is overvalued and explained why he’s a bit more pessimistic about the global economy than the average Wall Street insider.
“Asset prices are sort of inflated,” Dimon told CNBC’s Andrew Ross Sorkin in an interview at the World Economic Forum in Davos, Switzerland. (“I’m talking about the US stock market,” he added, “that’s not true for stock markets around the world.”)
U.S. stocks were among the world’s best performers last year, having also climbed the year before. This outperformance can be explained by years of strength in the US economy, supported by a resilient labor market and consumer spending, in the face of high interest rates.
Wall Street widely expects the United States to continue to outperform this year, thanks in part to the animal spirit expected to be unleashed by President Donald Trump’s deregulation and tax-cut plans. Dimon, who was asked Wednesday why he was “cautiously pessimistic” rather than “cautiously optimistic” about the economic outlook, pointed to high asset values.
“You need very good results to justify these prices,” he said. “Having growth-friendly strategies helps achieve this, but there are negative aspects that may tend to surprise you. »
On the one hand, Trump inherits the most expensive US stock market in history. According to a The Wall Street Journal According to one analysis, the Shiller P/E ratio of the stock market on the day of Trump’s second inauguration was 44% higher than at the start of Herbert Hoover’s inauguration, just months before the stock market crash of 1929 and the start of the Great Depression.
Dimon’s concerns extended beyond stock valuations. Echoing statements made last week in JPMorgan’s quarterly earnings report, he expressed concern about the long-term risks of rising geopolitical tensions in Europe, the Middle East and Asia. Global sovereign finances, he added, are another source of concern.
“What I’m a little cautious about is deficit spending,” he said. “This is a global problem, not just an American problem. And the related question ‘Will inflation go away?’ I’m not so sure.”
Dimon appeared to express support for the Trump administration’s promise to cut government spending and slash regulations. “Growth is the only real solution to reduce these deficits, to reduce the debt,” he said.
