Dimon warns of financial turbulence pushing investors to rethink US exposure
JPMorgan Chase CEO Jamie Dimon is once again sounding the alarm on the US bond market, a warning that could have lasting effects on mortgage rates and investor sentiment.
In a Fox Business interview this week, Dimon said the worsening US fiscal situation is a “real problem” and predicted “the bond markets are going to have a tough time,” though he didn’t specify when that might occur.
His comments come as US Treasury yields rise in response to growing concerns about the federal deficit and a controversial tax-cut agenda. Yields on 2- and 10-year Treasury notes both climbed Monday, while the 30-year fixed mortgage rate has moved up to 6.89% as of May 29, according to Freddie Mac.
Mortgage rates typically follow the 10-year Treasury yield, which has surged by nearly 47 basis points since early April.
This uptick in yields has pushed mortgage rates closer toward 7%, a level that continues to weigh heavily on homebuyers. According to the National Association of Realtors, existing home sales fell by 0.5% last month, the weakest pace for April since 2009. Spring’s usual buying momentum has stalled amid economic uncertainty, policy volatility, and affordability challenges.
“If household uncertainty around jobs, investment portfolios and budgets eases, then home sales could be poised for a rebound in the months ahead,” said Kara Ng, a senior economist at Zillow. “However, the affordability advantage could diminish if mortgage rates continue to rise.”
Investor diversification on the rise
Dimon’s fiscal warnings have ignited broader concern that US investors may be overly reliant on domestic markets.
“Maybe investors should be looking to diversify geographically to make sure they’re not too exposed to the US,” said Derek Tang, an economist at Monetary Policy Analytics.
He noted that international investors have already begun pulling capital toward European and Asian markets in response to growing US debt.
“At the end of the day, the US bond market is not as resilient as it was five or six years ago, but it’s still the world’s deepest market,” Tang added. “The US still has a lot going for it, though Dimon is right to point out that the government needs to act to make it more resilient.”
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Still, not everyone agrees with Dimon’s bleak outlook. Treasury Secretary Scott Bessent downplayed the CEO’s warnings on CBS News, stating: “For his entire career he’s made predictions like this. Fortunately, none of them have come true.” He emphasized that the administration intends to lower the deficit gradually over the next four years.
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