Dimon’s assessment on the economy and market appears more ominous than his own in-house forecasters. Michael Feroli, JPMorgan’s chief US economist, expects real gross domestic product to expand every quarter through the end of 2023.
While market strategists led by Marko Kolanovic admitted their year-end targets for financial assets may not be reached until next year, the team kept their upbeat tone on corporate earnings. It had expected the S&P 500 to rally to 4,800 by December.
“Equities are proving to be an effective real asset class as their earnings are linked to inflation,” the team wrote in a note last week. “Unless nominal GDP growth downshifts drastically, earnings growth should remain resilient and defy expectations of a decline even in an environment of low real GDP growth.”
The clashing views underscores the reality of the post-pandemic world where Wall Street forecasts vary and efforts to predict the future have proved futile. Central bankers and investors alike misjudged the stickiness of inflation. Lately it’s become clear that retailers and chipmakers miscalculated demand and ended up stocking too many unwanted goods.
With the Fed engaged in the most aggressive monetary tightening in decades, no one can say with high conviction where the economy is going. That murky backdrop has led to a wide range of projections when it comes to corporate profits for next year -- a 13% expansion to an 8% contraction, based on strategists tracked by Bloomberg.
Jane Edmondson, chief executive officer at EQM Capital, says she’s more optimistic than Dimon, though she shares the concern over the Fed’s inability to address the supply side of the inflation issue.
“I would agree that if the Fed does not slow down on its quest to combat inflation, we could see more market pain,” she said. “While their hawkishness with interest rates may curb some demand, it does not solve the issues in the supply chain causing higher prices and inflation. In that sense, Jamie’s concerns are warranted as the cure is not appropriate for what ails us.”
--With assistance from Yvonne Man and Vildana Hajric.
This article was provided by Bloomberg News.