A note from JP MOrgan with the transmission channel from stick inflation to higher for longer rates and thus a lid on the equity market.
- “we stick to our long-held view that inflation will keep moderating, we worry that there is no cushion here anymore, most are fully on board with the view”
But …
- “At the same time, it is likely easier for inflation to move down from say 10% to 5%, but the move from 5% to 2% becomes incrementally harder”
On the implication for central banks:
- “Central banks could stay higher for longer …”
And thus equities:
- ” … which would limit any prospect for multiple expansion, and the market would then need to solely rely on earnings growth for upside”
—-
And, more:
JPM say that there is
- “a growing possibility that core PCE inflation could actually run above core CPI inflation for a time — reversing the historical gap between these two measures”
And this:
“We continue to look for the Fed to keep rates on hold into 2H24—barring an unexpected recession”
Too early to celebrate.