FX.co ★ JPMorgan paints bleak picture of global economy in near term

Currency strategists at JPMorgan are pessimistic about near-term global economic prospects. According to Marko Kolanovic, the bank’s leading analyst, market participants should be wary of disinflation, which may start in the first half of 2024. In addition, the expert warns of growing geopolitical tensions, dampening risk appetite. In the first six months of this year, however, geopolitical turmoil could boost risk sentiment.

JPMorgan's top strategist believes that disinflation and lower US Treasury yields indicate an economic slowdown and declining corporate earnings. Being weaknesses on a global scale, such factors increase market vulnerability. In such a situation, investors could suffer losses, Kolanovic assumes.

At the same time, the high-profile Wall Street analyst points to cooling inflation as a positive factor for the market. For the US economy, this means sufficiently sticky inflation remaining at around 3%, above the 2% target previously adopted by the Federal Reserve.

At the end of 2023, the market entered overbought territory, driven by hefty gains in equities and bonds. As a result, investors let their guard down and the market sagged. The start of 2024 was marked by a modest rally amid strong US data and heightened geopolitical risks.

JPMorgan warns that lower bond yields could affect the stock market. Consequently, corporate earnings could plunge amid a slowdown in business activity. At the same time, price controls are weakening, with corporate profits declining.