Jamie Dimon, the chief executive of America’s largest commercial bank JPMorgan Chase (JPM), is in the news again. This time, Dimon noted that the U.S. stock market appears to be overheating, making him more “far more worried than others” about the likelihood of the market falling within the next six months to two years.
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The top banker noted this during an interview with the British Broadcasting Corporation business presenter Simon Jack. He gave the interview while in Bournemouth, a resort town on the south coast of England, where he announced a new investment of about £350 million ($477 million) in the company’s office there.
A ‘Higher Probability’ of Market Correction?
During the interview, Dimon noted that he holds a “higher probability” of market correction compared to the level of risks currently priced into the stock market.
He explained that the market is currently priced very high, with equity and debt valuation metrics (or the prices of stocks and bonds) sitting at around 85% to 90% higher due to massive liquidity injected during the COVID-19 period. These injections include the $10 trillion in U.S. federal debt and the $4 trillion expended on global quantitative easing by central banks to make borrowing cheaper, thereby propping the global economy.
Dimon believes that this flood of money has boosted corporate profits and stock prices, with the price of gold jumping to an all-time high. The injections are also fueling cryptocurrencies and even meme stocks, raising the chances of a fall.
Furthermore, the chief executive pointed to uncertainty in geopolitics and the remilitarization of the world, noting that “the level of uncertainty” about the market “should be higher in most people’s minds than what I call normal.”
Bank of England Warns about Stock Market
JPMorgan CEO’s comment comes a day after the Bank of England warned that share price valuation on the U.S. stock market is on track with the peak of the dotcom bubble of the early 2000s. “The risk of a sharp market correction has increased,” said the UK’s central banker, noting the possible impact of what has been seen as an ongoing AI bubble.
Meanwhile, the comment also follows Dimon’s recent warning about “market complacency” and the risks it posed to the stock market and the American economy.
Is JPMorgan a Good Stock to Buy?
Turning to Wall Street, JPMorgan’s shares currently have a Moderate Buy consensus rating from analysts, as seen on TipRanks. This is based on 12 Buy and six Hold recommendations issued by 18 analysts over the past three months.
However, the average JPM price target of $330.13 indicates about 9% growth potential from the current level.
