JPMorgan's Dimon and Goldman's Solomon warn investors to be 'cautious' and 'vigilant' as economic risks mount and conflicts rage

• Investors should be very cautious, two leading Wall Street CEOs warned on recent earnings calls.
• JPMorgan's Jamie Dimon cautioned the boost to portfolios from public policy wouldn't last.

Two Wall Street heavyweights have urged investors to be careful as they navigate a morass of economic and geopolitical threats.

"I think you have to be very cautious," JPMorgan CEO Jamie Dimon said on the bank's third-quarter earnings call Friday, according to a transcript provided by AlphaSense/Sentieo.

The billionaire banker noted that historic amounts of fiscal and monetary stimulus have boosted asset prices and corporate profits in recent years, but warned the uplift won't last forever.

Dimon also flagged the ongoing wars between Russia and Ukraine and Israel and Hamas as an "extraordinary issue," adding that geopolitical problems usually spark recessions or tank markets.

"Because markets do well is not a reason ever to say they're going to continue to do well," he said, pointing to the collapse of the dot-com and housing bubbles among other examples.

"My caution is that we are facing so many uncertainties out there," Dimon continued, advising people to act prudently given the myriad risks facing their portfolios. His comments echoed his warning in JPMorgan's earnings release that "this may be the most dangerous time the world has seen in decades."

Goldman Sachs CEO David Solomon raised similar concerns on the bank's earnings call Tuesday. While the US economy has displayed surprising resilience, he said "there are reasons to be vigilant."

Solomon highlighted the surge in Treasury yields and unexpectedly strong inflation and employment data in recent months. Those pressures could pave the way for interest rates to remain higher for longer, he said. Moreover, he argued the full impact of steeper rates hadn't yet been felt by some parts of the economy.

"I'm still of the belief that there's been a lag with this tightening," he said. "I do think over the next two to four quarters, the impact of that tightening will be more evident and will create slowdowns in some areas."

In response to inflation hitting a 40-year high last spring, the Federal Reserve raised rates from virtually zero to more than 5% in the space of 18 months. Higher rates can curb price growth by encouraging saving over spending and raising borrowing costs for consumers and businesses, but they can also sap demand to the point that asset prices tumble and the economy falls into recession.

Solomon underscored that he didn't necessarily expect a recession to take hold. However, he did note that several corporate executives have told him they've seen softer consumer demand in the past couple of months.

The Goldman chief also rang the alarm on international conflicts and disputes.

"There has been an escalation of geopolitical stresses around the globe — the war in Ukraine, ongoing tensions with China and now the conflict in the Middle East," he said. "Overall levels of risk are more elevated than we've seen in quite some time."

Solomon cautioned those threats could disrupt economic growth and stability in the US and other countries, and said Goldman remains "cautiously positioned" given the uncertain backdrop.