Discover JP Morgan Research’s insights into the anticipated global economic landscape for 2024, including predictions of a controlled slowdown and the looming risk of a recession. Explore regional perspectives, potential geopolitical risks, and the intriguing outlook for US regional banks’ stocks. Plus, get an exclusive look at projections for inflation, earnings growth, and the troubling forecast of electricity and natural gas shortages in major US cities. Don’t miss the comprehensive analysis of J.P. Morgan’s predictions shaping the financial landscape in the coming year.
JP Morgan Global Economic Overview
The challenging macroeconomic landscape characterized by slow growth and persistent inflation is anticipated to sustain higher interest rates for an extended period. Contrary to market expectations of early commencement of easing cycles in developed markets, J.P. Morgan economists predict potential disappointment in this regard. The projection indicates a slowdown in U.S. and global growth by the conclusion of 2024.
Simultaneously, liquidity is diminishing as major central banks unprecedentedly reduce their balance sheets, contributing to continued constraints on borrowing rates across consumer and corporate sectors.
J.P. Morgan Research estimates a decline in excess liquidity and cash-like assets among U.S. households, from a peak of $3.4 trillion to $1 trillion, with depletion likely by the second quarter of 2024.
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“JPMorgan Strategist Predicts President Biden’s Withdrawal from 2024 Presidential Race”.
According to Michael Cembalest, a top strategist at JPMorgan, President Biden is predicted to withdraw from the 2024 Presidential race citing health concerns. Cembalest also claimed that Biden would resign from the contest between Super Tuesday and the November election and hand over the baton to a substitute chosen by the Democratic National Committee. The report also highlights that Biden has a low approval rating for a President with ~10% job creation since his inauguration, although that figure is the by-product of his inauguration coinciding with the rollout of COVID vaccines and a reopening US economy.
JP Morgan Regional Prediction.
Looking at different regions, the U.S. maintains a quality premium over other markets, attributed to its diverse sector composition and the presence of cash-rich mega-cap stocks. Internationally, within developed markets like the U.K., there’s an optimistic outlook for equities due to substantial valuation support and favorable sector structures. Despite a notable lag in performance this year, China holds the potential for improved results if growth momentum aligns with positive projections and geopolitical risks remain under control.
US Regional Banks’ Stock Outlook for 2024
The strategist anticipates favorable prospects for US regional banks’ stocks in 2024. Despite potential challenges such as underwater Treasuries, commercial real estate writedowns, deposit competition, and a deceleration in loan growth, it is predicted that the price-to-book ratios of US regional banks will persist at 1.0x or higher throughout the year.
Electricity and Natural Gas Shortages Looming Over Major US Cities in 2024
According to J.P. Morgan Research, major US cities may face electricity and natural gas shortages in 2024. Their assessments, which include the 2023 risk assessment from the North American Electricity Reliability Association, indicate that a significant chunk of the North American power grid faces the possibility of an inadequate supply of electricity under peak winter circumstances. Prolonged wide-area cold snaps threaten the reliable performance of bulk power system generation and the availability of natural gas. States such as New York, Texas, Pennsylvania, Wisconsin, and Tennessee are now more likely to have power outages during the winter.
Expectations of Inflation Moderation
The anticipation of inflation moderation is tempered by enduring supply chain disruptions and a shift in inflationary sentiment. The impact is anticipated to be particularly pronounced in the business sector, leading to a compression of profit margins. This, in turn, is likely to induce a deceleration in both hiring and spending activities.
Anticipated Earnings Growth and Price Projection
According to J.P. Morgan Research, a moderate earnings growth of 2-3% is forecasted for the upcoming year. The estimated earnings per share (EPS) is $225, coupled with a projected price target of 4,200. It’s important to note that a downside bias is expected for the S&P 500, indicating a cautious outlook on potential market fluctuations.
Geopolitical Risks in 2024
Heightened geopolitical risks mark the global landscape, as two significant conflicts persist, accompanied by upcoming national elections in 40 countries, including the U.S. This scenario is anticipated to contribute to increased equity volatility throughout 2024 compared to the preceding year. The magnitude of this rise hinges on the timing and severity of a potential recession.
It is predicted that the Russian invasion of Ukraine will persist without a ceasefire.
Conclusion:
In summary, J.P. Morgan Research anticipates a smooth deceleration of the global economy by mid-2025, though a cautious outlook includes a slight possibility of a recession in the first half of 2024. Notably, the U.S. maintains its advantageous position with a quality premium over other markets, attributed to its sector diversity and flourishing mega-cap stocks with substantial cash reserves. Internationally, particularly in developed markets like the U.K., positive prospects are foreseen due to robust valuation support and favorable sector structures. Despite a lag in performance this year, there’s potential for improved results in China, contingent on sustained growth momentum and controlled geopolitical risks.
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SAM is a journalist with over a decade of experience in the field. His writing style is characterized by a focus on current events, in-depth research, and a commitment to journalistic integrity. In addition to writing, SAM is an avid traveler and enjoys exploring new cultures. He has visited over 20 countries and has used his experiences to inform his writing. When he’s not writing or traveling, SAM enjoys spending time with his family and playing tennis.