JP Morgan modestly positive over US outlook
Lucía Gutiérrez-Mellado, JP Morgan AM’s Director of Strategy for Spain and Portugal, forecasts a scenario of modest yet positive growth for developed economies due to robust labor and consumption markets. Recession seems unlikely in the remaining half of the year.
The presentation of the firm’s market outlook and strategy reveals Gutiérrez-Mellado’s prediction of the US Federal Reserve’s interest rate hike to 5.25-5.5%, despite hints of only two hikes by government members. The European Central Bank (ECB) is expected to raise rates with two 0.25% hikes to 4.5%. Both central banks will maintain these higher rates longer than expected to tackle inflation. The Eurozone’s technical recession, influenced by Germany, is viewed as temporary, with recovery underway due to strong labor markets and business profits. A similar trend is anticipated in the US, with attention on the impact of a regional banking crisis.
Gutiérrez-Mellado projects future regulatory alignment between major and regional banks following the regional crisis. US families’ lower leverage is seen as an advantage in navigating financial tightening. While US inflation is improving, European levels remain high, influenced by service demand.
JP Morgan’s stance has turned more positive, with minor shifts like increasing equity allocation. Fixed income remains favored, and bond quality rises with lower recession odds. In equities, earnings expectations correction aligns with economic slowdown predictions. Adjustments involve adding weight to Japan and the UK.
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