Prices are 'elevated' & 'significant risks' remain: Jamie Dimon

Yahoo

6 days ago

JPMorgan (JPM) released second quarter earnings results on Tuesday. On the earnings call, JPMorgan CEO Jamie Dimon said that asset prices are elevated and present a risk to the market going forward.
New York Life Investments economist and portfolio strategist Lauren Goodwin joins Opening Bid host Brian Sozzi to share her thoughts on Dimon's comments, and Yahoo Finance Senior Reporter Allie Canal provides additional context, including the latest inflation data, the state of the US economy, and the Federal Reserve's upcoming meeting.
To watch more expert insights and analysis on the latest market action, check out more Opening Bid here.
One thing that Jamie Dimon, uh, said on his prepared remarks on earnings releases that stood out to me. He thought or he thinks, uh, asset prices are elevated and then secondarily that is a risk moving forward. Do you agree with him?
I do agree with him. It's not necessarily that asset prices are unfair for the economic backdrop that we have today, but we know that there are risks on on the horizon that are likely to impact the economic data and reality moving forward. Now, from a high-level markets and macroeconomic perspective, the earnings reports that we have coming out this quarter are likely to be reasonable. And I don't expect that the worst of the policy risks that we're seeing unfold in the moment to really hit the economic data until later this quarter and into Q4. And so, we're looking at a market environment that could continue to be constructive moving forward. But as investors, we have to think very carefully about where incremental sources of value are. If they've been stored in momentum and beta here in the last couple of months, then focusing on the fundamentals and credit quality becomes so much more important moving forward.
Lord, let me just follow up on that because is this one of those calls from from Jamie Dimon where we we appreciate today, but a week from now the markets are off their highs and we go back and think, well, Jamie Diamond called the market top. Is that what do you think he's trying to say here?
You know, I think that the the the banks in particular have many policy backdrop components that they've been benefiting from and may continue to benefit from moving forward. Last year the Fed cut rates by 100 basis points that helps deepen the curve that tends to be, uh, tends to be constructive for bank earnings. More volatility means more sales and trading revenue, which can, uh, bolster bank earnings as well. And we're looking at a deregulatory backdrop moving forward that might be more favorable to the banks. I think the real challenge is if we see demand destruction as a result of tariffs or other policy changes moving forward. That's really where the challenge for the banks comes ahead. And so, if nothing else, I see this as a a way to hedge the the elements of the economic backdrop that, uh, CEO can't control right now.
I asked Jamie Diamond on a call with, uh, with reporters this morning why he called out elevated risks or elevated asset prices as a risk. I mean he kind of laughed at me a little bit, he giggled. He's well, he basically said, well, look at the alternative would be stocks would be down. But he did bring up a good point in that the market is pricing in a soft landing. And I thought that was a very good thing to call out.
Yeah, and if you even take a look at the inflation data, right, we have yet to see those tariffs really affect consumer prices. We did see a little bit of signs apparel prices ticking up, footwear ticking up. But used cars, new vehicles, those prices dropped. And that's an encouraging sign at where we're at. Now, at the same time, economists have been saying we saw a lot of front loading. Tariffs are going to take time to work their way through the system. So it'll be interesting to see how investors react to that. But then earlier this morning, we saw Bank of America release its fund manager survey and it did say that sentiment was getting toppy, but that equity positioning is not yet extreme, even though it's overweight. So that is a positive sign moving forward that perhaps this rally can continue, perhaps we can achieve the soft landing. Of course, Brian, as we know, the big TBD factor there is the Federal Reserve. What they decide to do when it comes to interest rates and the CPI report that we got this morning, pretty much tells us story that the Fed is going to remain on hold for the foreseeable future. We have markets pricing in basically a 100% chance that the Fed remains on hold in the next two weeks when we get that policy decision. And then September we also saw odds dip below 60%. And that's pretty notable here since markets had consistently been pricing in a September rate cut. But it seems like markets are now thinking, maybe we could see a cut in December or maybe not even at all this year. And I wonder how investors will react to that reality.