“JP Moran”: US economy is heading towards stagflation

JPMorgan said the US economy is at risk of tipping toward stagflation, or a period characterized by low growth and persistently high inflation, which would push investors to favor stocks over bonds.

The bank added, according to what was reported by CNBC, “We could be heading towards the return of stagflation, as was the case in the 1970s.”

He explained in a note that stocks were flat from 1967 to 1980, and with average returns of more than 7%, bonds significantly outperformed stocks, highlighting that higher yields from options like private credit can be a game-changer to potential consolidation. In the long-term performance of the portfolio.

According to the bank, geopolitical tensions are a logical justification for possible stagflation, noting that the 1970s conflicts in Vietnam and the Middle East led to energy crises, shipping disruptions, and an increase in debt spending. The matter is repeated with the Red Sea chaos sparked by the conflict between Israel and Hamas, the Russian invasion of Ukraine, and American tensions with China.

According to the note: If the volatility that can come from political, geopolitical and regulatory uncertainty is added, public markets will be more disadvantaged versus private markets that can avoid the spotlight of daily volatility.

Jamie Dimon, CEO of the bank, said that the year 2024 may resemble the seventies, noting that the large fiscal deficit, shifts in trade patterns, and dedication to large government spending are all inflationary.