While U.S. equity markets are still trading near all-time highs, investors have reason to remain cautious. Not only is the rally primarily driven by a small handful of tech companies, but the economy continues to face multiple headwinds, such as high interest rates, elevated inflation, sluggish consumer spending, geopolitical tensions, and more. 

In fact, JPMorgan Chase (JPM) CEO Jamie Dimon just warned that companies in the commercial real estate sector remain particularly vulnerable, along with regional banks, especially if interest rates stay higher for longer than initially anticipated. Initial forecasts called for a rate cut as soon as this month, but the CME FedWatch Tool now shows only a very slim majority of 55% are expecting a rate cut as early as June 2024.

In an interview with CNBC, Dimon emphasized, “The market is kind of pricing in a soft landing. That may very well happen. But the [market’s] odds are 70 to 80 percent. I’ll give you half that, that’s all.”

Here are five stocks investors might want to avoid, given Jamie Dimon’s cautious economic outlook.

1. Vornado Realty Trust Stock

Valued at $5 billion by market cap, Vornado Realty Trust (VNO) is a real estate investment trust (REIT) with a portfolio of properties in New York, Chicago, and San Francisco. 

Shares of the REIT are down 75% from all-time highs as the company was impacted by the COVID-19 pandemic, as well as rising interest rates in the last four years. 

The company paid $400 million in dividends to shareholders in 2022. However, VNO was forced to suspend that payout in 2023, due to its weak financials and narrowing profit margins. 

2. SL Green Realty Corp Stock

Another REIT, SL Green Realty (SLG), acquires, develops, owns, manages, and operates commercial real estate properties. There have been concerns about commercial real estate as the COVID-19 pandemic showed the work-from-home trend is here to stay, resulting in higher vacancy rates for SL Green Realty and its peers in recent years. 

SL Green owns and operates a portfolio of 30 buildings spanning 33.1 million square feet of gross leasable area. However, the occupancy rates for the properties have fallen from more than 94% in 2019 to less than 90% in 2023, resulting in lower fund flows and earnings. 

3. Regions Financial Stock

Valued at $17.1 billion by market cap, Regions Financial (RF) is among the largest mid-sized banks in the U.S. The bank stock currently trades 51% below its all-time highs, raising the dividend yield to more than 5%. However, the regional lender has also missed earnings estimates in three of the last four quarters, due to an uncertain macro environment. 

Regions Financials explained that higher deposit and funding costs are weighing on profit margins, and the trend is forecast to continue in the near term. Analysts forecast earnings to narrow from $2.24 per share in 2023 to $1.98 per share in 2024. 

4. Cullen/Frost Bankers Stock

Another regional bank, Cullen/Frost Bankers (CFR), reported Q4 earnings of $100.9 million, or $1.55 per share, compared to $189.5 million, or $2.91 per share, in the year-ago period. On an adjusted basis, CFR earned $2.18 per share.

The company emphasized its results were impacted by an FDIC insurance surcharge of $51.5 million associated with bank failures in early 2023. Its return on equity fell to 13.5% in Q4 from 27.16% in the same period in 2022. 

Cullen/Frost maintained that it is well capitalized, and ended Q4 with a loan-to-deposit ratio of 45%. However, its earnings are forecast to decline to $8.45 per share in 2024, down from $9.73 per share in 2023. 

5. Commerce Bancshares Stock

The final stock on my list is Commerce Bancshares (CBSH), which reported Q4 earnings of $0.84 per share, or $109.2 million, down from $1 per share, or $131.6 million in the year-ago period. 

Priced at 17 times forward earnings, the stock is not cheap, given earnings are forecast to narrow to $3.24 per share in 2024 from $3.64 per share in 2023. 

Similar to other bank stocks, Commerce Bancshares looks vulnerable, especially if the economy deteriorates, resulting in higher delinquency rates and provisions for credit losses.