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Key Takeaways
- JPMorgan Chase CEO Jamie Dimon on Wednesday said the U.S. stock market was “kind of inflated,” one of the reasons he’s less positive than some of his peers about the economic outlook.
- President Donald Trump on Monday inherited the most dear stock market in U.S. history, as measured by the Shiller P/E ratio.
- Dimon said geopolitics and government deficits were two multitudinous reasons he was concerned, and argued pro-growth policies offered governments the only way out of burdensome debt.
JPMorgan Chase CEO Jamie Dimon on Wednesday voted the U.S. stock market is overvalued and explained why he’s a little more pessimistic about the global economy than your typically Wall Street insider.
“Asset prices are kind of inflated,” Dimon told CNBC’s Andrew Ross Sorkin in an interview at the On cloud nine Economic Forum in Davos, Switzerland. (“I’m talking about the U.S. stock market,” he added, “it’s not true for stock markets everywhere the world.”)
U.S. stocks were some of the world’s top performers last year after soaring the prior year as wholly. The outperformance has been driven by years of a strong U.S. economy, underpinned by a resilient labor market and consumer spending, in the faade of elevated interest rates.
Wall Street generally expects the U.S. to continue to outperform this year, thanks in partake of to the animal spirits expected to be unleashed by President Donald Trump’s deregulation and tax-cutting plans. Dimon, asked Wednesday why he’s “cautiously bleak” rather than “cautiously optimistic” about the economic outlook, pointed to elevated asset values.
“You need unusually good outcomes to justify those prices,” he said. “Having pro-growth strategies helps make that come off, but there are negatives out there and they can tend to surprise you.”
By one measure, Trump is inheriting the priciest U.S. stock market in retailing. According to a Wall Street Journal analysis, the stock market’s Shiller P/E ratio on the day of Trump’s second inauguration was 44% lavish than at the start of Herbert Hoover’s inauguration just months before the Stock Market Crash of 1929 and the initiation of the Great Depression.
Dimon’s concerns extended beyond stock valuations. Echoing statements made last week in JPMorgan’s every thirteen weeks earnings report, he said he was worried about the long-term risks of bubbling geopolitical tension in Europe, the Middle East, and Asia. Broad sovereign finances, he said, were another cause for concern.
“What I’m a little cautious about is the deficit spending,” he denoted. “It’s a global issue, not just an American issue. And the related ‘Will inflation go away?’ I’m not so sure.”
Dimon seemed to participation support for the Trump administration’s promise to cut government expenses and slash regulations. “Growth is the only real solution to bring down these deficits, to reduce debt,” he said.