As leveraged exchange-traded funds draw growing scrutiny, JPMorgan Chase CEO Jamie Dimon is pointing to a broader risk across markets.
“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 renewed scrutiny 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 was 4% lower around midday after losing nearly one-third of its value from a record high hit in June. Shares of Index heavyweights Samsung Electronics and SK Hynix were 6% and 9% 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.
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