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JP Morgan forecasts modest but positive growth in the US and Europe

Date: April 24, 2024 Time: 09:02:45

The JP Morgan AM Strategy Director for Spain and Portugal, Lucía Gutiérrez-Mellado, said this Thursday in a meeting with the media that her baseline scenario for developed economies is one of “discreet but positive growth”, thanks to the strength of the labor market and consumption, so the possibility of recession for the remainder of the semester is diluted.

Rise in interest rates

During the presentation that the manager has made this Wednesday of its vision of the market and strategy for the coming quarters, Gutiérrez-Mellado has predicted that, in this context, the Federal Reserve (Fed) will undertake one more rise in interest rates, up to the range of 5.25-5.5%, despite the fact that its members of government have dropped the possibility of two more increases.

For its part, the European Central Bank (ECB) would raise rates with two increases of more than a quarter of a point, up to 4.5%; and, in both cases, these maximum rates will be maintained for longer than what investors discounted to attack inflation.

The technical recession in the euro area -two quarters of negative growth, the last of last year and the first of this-, caused by Germany, is temporary, the board of directors pointed out, since “it is already coming out of recession” and, furthermore, “it has barely been noticed in the markets” due to the strength of the labor market and corporate profits, so there will be growth this year.

Crisis of banking entities

The situation can be extrapolated to the United States, but with the nuance, the executive pointed out, that it is still early to know the consequences of the regional banking crisis last March, although the authorities reacted well and deposit outflows have stabilized .

In this sense, he has pointed out that in the future there will be a greater convergence between the regulatory requirements of the big banks and the regional banks after that episode that resulted in the bankruptcy of entities such as Silicon Valley Bank (SVB). In addition, Gutiérrez-Mellado has verified that the leverage of American families is less, so they can better weather this cycle of financial tightening.

As for inflation, the element that conditions the entire economic scenario, he has argued that in the US they are going in the right direction (in June it fell to 3%, more than expected) but there is still a long way to go to reach the objective of the central banks; hence the need for high rates for longer.

“In Europe the picture is different”, considered the executive, because we are still at higher levels (it moderated to 5.5% in the euro area in June) due to the demand for services, as in the US, although the The fall in prices has been reflected in the industry and in logistics chains. It should also be noted, according to the manager, that the ECB began its cycle of monetary tightening later.

For its part, China has had a very strong recovery at the beginning, but now it has lost steam, while services continue to rise to the detriment of industry, they have pointed out from the manager, for which the Chinese government used monetary tools and fiscal to reach the growth objective of around 5% in the year.

Mellado has stressed that the Chinese authorities can carry out this policy thanks to their low levels of inflation, but has also stressed the importance of seeing a recovery in consumer confidence.


In this way, JP Morgan has indicated that its vision is now more constructive, which is why they have made some slight changes, such as adding a little more equities to the portfolio, which they had been underweighting against fixed income.

Thus, Gutiérrez Mellado has indicated that they have closed the difference with fixed income a bit and that the preferred asset continues to be durable in portfolios and that, at the same time, you can still see upturns in the IRR (internal rate of return) but that current levels are already attractive.

Within fixed income, he has indicated his preference for the American one over the European one considering that the end of the rate hike cycle is closer and inflation is more controlled. In credit they have made some changes as the possibility of recession has been reduced, for which reason they have once again overweighted high credit quality bonds.

Within equities, there is already an elimination of active expectations of corporate profits that coincide with the prospects of economic slowdown and, in this sense, they have neutralized that position in search of opportunities, adding weight in Japan and the United Kingdom.

* This website provides news content gathered from various internet sources. It is crucial to understand that we are not responsible for the accuracy, completeness, or reliability of the information presented Read More

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.

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