JPMorgan estimates a potential $165 billion stock selloff before June ends as quarter-end rebalancing triggers mechanical selling. According to Reuters, Japan's $1.9 trillion Government Pension Investment Fund leads the selling at approximately $60 billion, while US pension funds account for another $55 billion. Norway's and Switzerland's funds add tens of billions more, with balanced mutual funds offsetting roughly $15 billion of buying. The selling comes as the Federal Reserve held rates this month and signaled a possible hike this year, repricing rate-cut bets and lifting volatility across markets.
JPMorgan CEO Jamie Dimon has joined NYU Stern professor Aswath Damodaran in expressing caution about the current AI-driven market rally, despite Wall Street's continued optimism. According to Live Mint, Damodaran predicts that a future AI market correction could be far more damaging than the dot-com crash, primarily due to the massive debt-funded infrastructure spending driving today's AI boom. Dimon, speaking at the Council on Foreign Relations, expressed surprise at the market's apparent complacency, stating he is 'quite worried about it... They may determine the economy, but it may be a year from now, a few years from now, or maybe it will all be reserved somehow.'
Global hedge fund leverage has reached multi-year highs, with gross hedge fund leverage reaching about 294% in June 2025, a five-year high according to Reuters. Goldman Sachs prime brokerage data shows net leverage has since pushed to four-year highs. JPMorgan strategist Nikolaos Panigirtzoglou warns that semiconductors' share of global equity value is now more than six times their share of revenue, over double the comparable figure for the Magnificent Seven. This concentration leaves the AI rally exposed if sentiment turns, with stretched positioning in semiconductors raising risks of more frequent selloffs.
Despite global challenges including the Russia-Ukraine war, inflation across major economies, and the recent US-Iran conflict, US stocks have continued hitting new highs with the S&P 500 up nearly 80% over the past five years and Nasdaq up more than 86%. As reported by Live Mint, the AI boom has fueled hopes of stronger corporate earnings and a new wave of productivity gains in technology companies. Companies are expected to invest nearly $700 billion in AI technology this year, a trend that is likely to continue. However, Dimon noted that while investors celebrate the AI-driven rally, he remains cautious about the market's apparent complacency at present.
Despite Dimon's caution, several factors continue to support the current market rally. As reported by Live Mint, unemployment is holding steady at 4.3% and GDP is expanding at approximately 2%. Consumers have received a boost from the One Big Beautiful Bill Act, though much of this relief has been offset by a surge in fuel prices resulting from the Middle East conflict. Dimon noted that while these factors aren't necessarily 'bad' right now, he remains concerned about how they might impact the economy in the longer term.
