JPMorgan, which recently published its Mid-Year Market Outlook report, made some critical assessments about the course of the global economy in its report.
Global Core Inflation Will Remain Above 3% By 2024
According to the report published by the international financial institution JPMorgan, global core inflation is expected to hover above 3 percent until 2024. Chief Global Economist Bruce Kasman said it’s unrealistic to expect inflation to automatically recede into central banks’ comfort zones. It was not stated that core inflation is expected to fall below 3 percent for Europe and the USA at a point where supply is damaged and the inflation psychology is changing.
Stating that sticky core inflation will continue the pressure on central banks, JPMorgan economists wrote that this may lead central banks to tighten their policy stances further.
Global Economic Growth Accelerates, But Global Recession Dangers Before 2024
According to the report, global economic growth accelerated in the first half of 2023, reaching 2.8 percent. However, a new monetary tightening is expected before the end of 2023 in developed markets in order to contain inflation. In this case, it is stated that it can negatively affect the health of the private sector and lead to a simultaneous global recession. The report also highlights the possibility of a global recession before the end of 2024.
Asian Economies Continue Strong Growth, But Chinese Economic Data Disappoints
Pointing out that the Asian economies grew by 5.2 percent on average in the first half of the year, above their potential, the report noted that the situation is slightly different for China.
While it was stated in the report that China was generally below expectations in the economic data shared since April and this situation damaged China’s recovery expectations, it was stated that this situation started to complicate the expectations.
As of the end of 2022 and the beginning of 2023, the view that economies that will slow down as a result of rapidly increasing interest rates, especially after global high inflation, will be balanced with the rapid growth in China and that a global recession can thus be avoided, was quite common in the markets. However, the fact that the economic data announced in China was below market expectations seems to have rekindled recession fears.
Tough Market Conditions Are Expected in the USA, Stock Markets Do Not Reflect the Realities
The report expects the US economy to enter a recession in the last quarter of 2023 or the first quarter of 2024. JPMorgan analysts point out that the exchanges are trading at prices that do not reflect this reality. It is emphasized that growth-supporting factors such as strong savings and profit margins are starting to disappear.
Analysts said that stock markets elsewhere in the world were not much different, saying that gloomy markets were common globally. Mislav Matejka, Head of Global Equity Strategy at JP Morgan, said: “We believe that the view that the worst of pressures is over is wrong, historically because the effect of monetary tightening has lagged. In addition, certain growth incentives such as excess savings and strong margins are decreasing,” he commented.
Headwind Expected Across Asset Classes
According to JPMorgan Chief Cross-Asset Strategist Thomas Salopek, the long- and short-term outlooks for the stock market are conflicting. It is stated that in the next 3 to 5 years, headwinds may be effective in the stock market and attractive earnings opportunities may arise in bonds and loans.
This news is based on JPMorgan’s global market outlook report. Global core inflation, monetary tightening and global recession expectations are highlighted in the report. The difficult market conditions in the US economy and the unrealistic pricing of the stock markets are also highlighted in the report.
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