The CEO of JPMorgan Chase, the world's largest bank by market cap, sat down for a one-hour interview with Wilfred Frost and laid out a cautious view of where markets are headed.
When Frost asked directly if he would put money into long-dated Treasurys, Dimon answered, "Personally, no."
The S&P 500 has returned nearly 10% so far this year. But Dimon thinks the good times are hiding something.
"I do think those risks are probably bigger than other people think," he said.
The big worry for Dimon is the U.S. budget deficit. The government keeps spending more than it takes in, and that debt has to get funded somehow. His view is that ongoing shortfalls will sooner or later spark a crisis, likely pushing up borrowing costs. "It's possible something's baked in, but what's not baked in is what actually happens," he said.
Dimon forecast rising yields as what are known as bond vigilantes require higher premiums to fund the nation's debt. Dimon put it plainly: "My view is it will become a problem." He acknowledged that it might take time. "You may need more straws in the camel's back to cause that tipping point," he said. "Even this current war starting up again, maybe that's not enough to do it."
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Dimon also weighed in on the frenzy around artificial intelligence. He likened the current investment surge to the internet's initial phase.
"The amount of money being spent is huge. Will it in total pay off? Probably, just like the internet did," he said.
But here is the catch. "Will it pay off the way you expect and the timetable you expect? Definitely not." Dimon observed that early internet giants such as Yahoo and Netscape eventually vanished, while later winners including Google and Facebook took over the space.
As head of the largest U.S. bank by assets, Dimon has a long track record of calling out macro risks before they materialize. His cautionary stance comes amid record-high stock valuations and a bond market that has already repriced sharply this year. The 10-year Treasury yield recently hovered around 4.3%, and Dimon's prediction that it will settle in the 4%-4.5% range suggests little room for further bond price gains. His remarks also reflect growing unease among Wall Street leaders about the sustainability of government deficits, which have topped $1 trillion annually even in a strong economy.
Dimon is not telling anyone what to do with their own investments. But when the CEO of the largest bank in the world says he is sitting on the sidelines, it is worth paying attention to his reasoning.
His main point: markets look calm but risks underneath are bigger than most realize.
For bonds, his view is clear. If the 10-year yield rises to the 4% to 4.5% range he expects, existing long-term bonds would lose value.
The bottom line: Dimon sees a world where the easy trades are behind us. Whether his caution is justified or not will play out over time.
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