JPMorgan Chase CEO Jamie Dimon has issued a warning on the build-up of risks in global credit markets, cautioning that investors may be underpricing potential losses—not just in private credit, but across the broader leveraged lending ecosystem.

In his latest annual letter to shareholders, Dimon said that while the private credit market, estimated at $1.8 trillion, is unlikely to pose a systemic threat, the underlying vulnerabilities across credit markets are becoming harder to ignore.

Losses will be higher than expected

Dimon’s central message is unambiguous: “I do believe that when we have a credit cycle, which will happen one day, losses on all leveraged lending in general will be higher than expected, relative to the environment.”

The warning extends beyond private credit to include leveraged loans and high-yield markets, suggesting that the entire risk spectrum tied to corporate borrowing may be more fragile than current pricing implies.

Importantly, Dimon also indicated that early signs of stress are already visible. “Actual losses right now are already a little higher than they should be, relative to the environment,” he wrote.

Weakening credit discipline raises concerns

Dimon’s argument is pillared on the weakening of credit underwriting standards across markets. He points to a combination of structural shifts that have increased risk-taking, including:

• More aggressive and positive assumptions about future performance (called add-backs)

Taken together, these trends indicate a market environment where lenders have relaxed safeguards in pursuit of yield, particularly in private markets where competition has intensified.

Transparency risks could amplify stress

Dimon also flagged a critical difference between private credit and traditional public markets—limited transparency.

“Private credit does not tend to have great transparency or rigorous valuation ‘marks’ of their loans”.

This lack of real-time price discovery, he warned, could exacerbate volatility during periods of stress:

“This increases the chance that people will sell if they think the environment will get worse — even if actual realized losses barely change.”

In effect, sentiment-driven repricing could amplify market dislocations, particularly in less liquid segments.

Rates could trigger further stress

The risk outlook is further complicated by the trajectory of interest rates and credit spreads.

Dimon noted that if borrowing costs rise, highly leveraged companies will face refinancing pressure:

“If rates or credit spreads ever go up, the companies that borrowed will have to borrow at even higher rates, putting them under even greater stress.”

This dynamic could act as a trigger point for broader credit deterioration, especially in segments where debt servicing capacity is already stretched.

While Dimon clarified that private credit “probably does not present a systemic risk” given its relative size, he cautioned against complacency. His broader message is clear: risks are not confined to a single segment but are embedded across the leveraged finance ecosystem.

The absence of a recent credit downturn may have contributed to misplaced confidence. “We have not had a credit recession in a long time, and it seems that some people assume it will never happen,” Dimon wrote.

Dimon’s assessment ultimately points to a disconnect between market pricing and underlying risk. As credit standards weaken, along with the emergence of early losses, and persisting macro uncertainties, he warns that the the next phase of the cycle—whenever it arrives—could be more disruptive than investors currently anticipate.