JPMorgan CEO Jamie Dimon warned that stocks are overvalued.
Dimon sees lingering risks such as inflation, government deficit spending and geopolitical tensions.
Dimon's comments echo Goldman Sachs' recent warning that the market is "priced for perfection."
JPMorgan CEO Jamie Dimon sounded the alarm on stocks today in an interview at the World Economic Forum in Davos, Switzerland, saying the market looks overvalued.
"Asset prices are a little bit elevated by any measure," Dimon told CNBC in Davos. "They're in the top 10 or 15 percent of historical valuations," he added.
The S&P 500 is less than 1% away from a record high, and rising valuations are a sign of the current bull market rally that began in October 2022.
The S&P 500's forward price-to-earnings ratio is 21.6 times, which is higher than its five-year and 10-year averages of 19.7 times and 18.2 times, respectively.
Dimon said a lot of things have to go right for the stock market to continue its record run.
"They've gone up and you need pretty good results to justify those prices. Having a strategy to promote growth can help with that, but there are negatives, and they tend to surprise you," Day said Meng said.
Some of the "negatives" Dimon is worried about include the possibility of a rebound in inflation, continued risks of government deficit spending and ongoing geopolitical risks.
"I'm a little cautious about deficit spending; this is a global problem, not just a U.S. problem," he said. “And the related (question), ‘Will inflation go away?’ I’m not so sure.”
Dimon's cautious remarks came as the new Trump administration unleashed "animal spirits" that helped spark a rally in stocks.
Top hedge fund investor Stanley Druckenmiller used the term in an interview with CNBC on Monday. He said that in his 49-year career, he has never seen such a big shift in Washington, D.C., from the anti-business stance of the Biden administration to the pro-business stance of the Trump administration.
“We talk a lot with local CEOs and companies, and I would say the mood among the CEOs is somewhere between relieved and giddy,” Druckenmiller said. “So we are believers in animal spirits. ”
But Dimon isn't the only one wary of stocks.
A recent report from Goldman Sachs strategists suggested that stocks are "priced to perfection."
The bank said it believes the stock market is increasingly vulnerable to a correction this year, especially given historically high valuations and concentration in a small number of stocks.
“On an individual market basis, U.S. valuations are at their highest in 20 years, and this remains true even if we exclude the largest technology companies,” Goldman Sachs said. “The combination of performance in recent months and high valuations means Returns are lower than in 2024.”
This isn't the first time Dimon has expressed caution about the stock market. He has repeatedly warned over the past three years of potential economic "hurricanes" that would harm markets, although his predictions have yet to materialize.
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