- JPMorgan CEO Jamie Dimon says broader market leverage is “pretty high.”
- High leverage raises the risk of sudden market disruptions, he says.
- Leverage has come under scrutiny after South Korea’s market sell-off and the Situational Awareness unwind.
“Market leverage is pretty high,” Dimon told CNBC in an interview aired on Wednesday
“When you have that, you do have a higher chance that something will disrupt the market in a quick way and people will get rattled over it,” he said
Dimon made the comments after being asked about the proliferation of leveraged single-stock ETFs that have drawn renewed attention in recent weeks
While Dimon said leveraged ETFs were not his primary concern, he pointed instead to broader market leverage
“Margin debt is the highest it’s ever been,” Dimon said, adding that not all market leverage is formally classified as margin debt
Still, Dimon stopped short of predicting a broader market crisis
“I’m not going to say it’s systemically high or that it’s going to cause a disaster, but it’s high,” he said
Dimon’s comments came as leverage has come under following two recent events
In South Korea, regulators tightened rules on single-stock leveraged ETFs, which seek to magnify a stock’s daily gains and losses, after heightened market volatility put the products into the spotlight
On Thursday, the Kospi index closed 5% lower and is one-third lower than its record high hit in June. Shares of Index heavyweights Samsung Electronics and SK Hynix ended the day 6% and 10% lower, respectively
Separately, the turmoil at AI-focused hedge fund Situational Awareness underscored how quickly highly leveraged positions can unravel
The hedge fund lost 67% in July and was forced to sell most of its public equities portfolio to Ken Griffin’s Citadel due to margin calls