Komo CEO Dimon warns that market leverage is already “quite high”, and hidden loans may explode fluctuations

The Zhitong Finance App learned that J.P. Morgan Chase CEO Jamie Dimon recently issued a warning saying that the current level of leverage in the financial market is still too high, and reminds investors that hidden loans may increase market fluctuations.

In an interview, he said, “The size of debt in securities financing has reached the highest level in history. Furthermore, there are also a large number of loans that are not included in securities financing; they exist under other names. Some of these types of leverage are hidden, while others are public.” He further pointed out that these lending channels cover areas such as prime brokerage business, hedge funds, exchange-traded funds (ETFs), and treasury bond arbitrage strategies, and said, “Overall, the level of market leverage is already quite high.”

This statement comes at a time when the market is once again focusing on the issue of leverage in the financial system. Currently, stock valuations are high, and hedge fund leverage is close to historic highs. Coupled with large-scale US bond base spread transactions, regulators are worried that risks are accumulating in some parts of the financial system.

Dimon pointed out that a highly leveraged environment increases the possibility that a single investor or fund will trigger widespread fluctuations. “Under such circumstances, the probability that an entity will quickly disrupt the market and cause investors to panic is indeed higher.”

Recently, Situational Awareness, a hedge fund focusing on the field of artificial intelligence (AI), was forced to liquidate most of its open market stock portfolio due to losing bets on highly leveraged technology stocks, and triggered additional margin requirements. J.P. Morgan Chase is one of the fund's main brokers. When asked about this, Dimon said that the incident just showed the market's ability to digest such cases without causing systemic disorder.

However, he did not characterize the current high leverage as a systemic threat; he only pointed out that the market can generally withstand the loss of individual institutions. “I'm not saying the current leverage is high enough to cause a disaster at a systemic level, but it's really high,” he said.

Dimon also distinguished the current environment from the 2008 financial crisis, believing that leverage itself will not necessarily lead to a systemic crisis. “The worst case scenario is a substantial loss in the market,” he said. “The point of the problem is not leverage, but the huge losses that are about to be realized in the mortgage sector.”

The head of J.P. Morgan Chase also stressed that banks will continue to adjust collateral requirements according to changing market conditions. “Clearing houses and banks often require more collateral when market volatility intensifies. We'll probably see this happen soon.”

Furthermore, Dimon also issued an early warning of long-term inflationary pressure, believing that structural capital demand — including government fiscal deficits, infrastructure investment, and global rearmaments — will be a factor supporting the rise in long-term interest rates. “Global arms restructuring will have an inflationary effect,” he reiterated earlier this year, saying that if these factors push investors to demand higher returns on long-term bonds, “they may become uninvited guests to the party.”