Valuations Are Overshot, and Dimon’s Warning Echoes the Danger

Jamie Dimon, CEO of JPMorgan Chase, recently warned that the U.S. economy is “weakening” and that the outlook is “uncertain.” Even by conservative measures, this is a cautionary signal. But when you couple Dimon’s warning with hard valuation data — and the long stretch without a meaningful correction — the narrative shifts from caution to alarm.

Market Valuations: Off the Charts

It’s not just a hunch: multiple valuation measures suggest U.S. equities are significantly overvalued — perhaps more than double fair-value levels.

Buffett Indicator (Total U.S. market cap vs GDP): Well above historical norms.
CAPE (Cyclically Adjusted P/E): Elevated vs long-term average.
Various composite metrics point to overvaluation in the range of 100% (or more) above what fundamentals can reasonably support.

Taken together, these suggest that equity prices are priced at at least twice their real fundamental value.

Dimon Isn’t Just Whistling Dixie

Dimon’s warning of a weakening economy takes on new weight against this backdrop:

If valuations are grossly inflated, any economic slowdown, inflation surprise, or weakening in earnings could quickly tip markets into steep decline.
Dimon’s concerns over labor market softness, policy uncertainty, lingering inflation, and geopolitical risk look like the flammable spark approaching an overly dry tinder pile.

Valuations stretched, no buffer for shocks → elevated risk of a sharp downward correction.

What Other Voices Are Saying

1. Labor Market Weakness: Mark Zandi (Moody’s)

Zandi argues the U.S. is already in a labor recession. Business Insider
The jobs report for August fell short of expectations; he also points to revisions (June-July) that suggest the workforce may actually be contracting. Business Insider
His warning: if layoffs begin in earnest, the labor recession could spill over into a broader economic downturn. Business Insider

2. Credit & Private Markets: Lloyd Blankfein

Former Goldman Sachs CEO Blankfein says another financial crisis could be brewing. Business Insider
He focuses on hidden leverage—especially in private credit markets—and insurers using complex/opaque investments. These could amplify risks in a contraction. Business Insider
Though he sees AI and other drivers holding some stability, he clearly identifies vulnerabilities. Business Insider

3. Stagflation Concerns & Jobless Claims Rising

Some analysts warn of stagflation: inflation staying above target even while growth slows and unemployment/initial jobless claims rise.
Jobless claims have spiked, hitting levels not seen in years. Inflation (particularly food, shelter) remains sticky. The Guardian+1

4. Market Behavior, Short Positions, & Hedging Activity

Little Harbor Advisors is reviving a short-selling hedge fund strategy in anticipation of a downturn. Business Insider
This kind of defensive move suggests institutions are positioning for downside risk. Business Insider

5. Valuations & Growth Warnings

Goldman Sachs warns that the AI-investment boom may be unsustainably propped up and could slow, which would reduce growth expectations and weigh on equities. Barron's
Deutsche Bank and Barclays have pushed up their S&P 500 targets, citing resilient earnings and AI tailwinds—but even these firms flag risks related to labor markets and inflation. Investopedia

6. Policy, Inflation, and Interest Rate Risks

A Reuters poll (107 economists) expects Fed to cut rates by 25 bps in September 2025, with at least one more cut later. But persistent inflation might limit how far and how fast the Fed can ease. Reuters
Rising debt among G7 countries (including the U.S.) is making investors nervous, especially as bond yields are rising. This puts further pressure on fixed income and increases the cost of risk. Reuters