JPMorgan CEO Jamie Dimon Warns of Elevated Financial Market Leverage

JPMorgan Chief Executive Officer Jamie Dimon has warned that leverage across financial markets remained elevated, adding that investors should be mindful that hidden borrowing could amplify market disruptions.

"Margin debt is the highest it has ever been," he said in an interview with CNBC's Leslie Picker. "There's a lot of margin debt you don't see because it's not called margin debt. It's called other things. It's that kind of leverage, some hidden, some public."

He pointed to borrowing through prime brokerages, hedge funds, exchange-traded funds and Treasury arbitrage strategies. "The market leverage is pretty high."

The remarks come amid renewed scrutiny of leverage in financial markets, as elevated equity valuations, near-record hedge-fund leverage and large Treasury basis trades have fueled concerns that vulnerabilities may be building in parts of the financial system.

Dimon said that heavy leverage increases the risk that a single investor or fund could trigger broader volatility. "When you have that, you do have a higher chance that somebody will disrupt the market in a quick way, and people get rattled over it."

AI-focused hedge fund Situational Awareness suffered heavy losses recently after leveraged technology bets turned against it, triggering margin calls and forcing it to liquidate much of its public-equity portfolio.

When asked about the recent collapse of Situational Awareness, for which JPMorgan was one of the prime brokers, Dimon said the episode demonstrated that markets can absorb its failure without broader disruption.

He also stopped short of describing the high leverage as a systemic threat, noting that markets have generally been able to absorb isolated failures.

"I'm not going to say it's systemic high, it's going to cause a disaster, but it's high," he said.

Dimon distinguished today's environment from the 2008 financial crisis, arguing that leverage alone does not necessarily cause systemic stress.

"The worst thing is if you have actual losses in the marketplace," he said. "It wasn't the leverage. It was the amount of losses that were going to be realized on mortgages."

The JPMorgan top boss highlighted that banks would continue adjusting collateral requirements in response to changing market conditions.

"When volatility goes up, clearing houses and banks generally ask for more collateral," he said. "So you'll probably see a little bit of that."

Dimon also warned that structural demand for capital could reignite inflationary pressures, pointing to government deficits, infrastructure investment and global rearmament as forces supporting higher long-term interest rates.

"The remilitarization of the world would be inflationary," he said, reiterating his statement earlier this year that those dynamics "could be the skunk of the party," if they lead investors to seek greater compensation for holding long-dated bonds.