JPMorgan Analysts Predict Soft Landing for US Economy and Low Chance of Trump Victory in Presidential Election
According to a recent note by JPMorgan analysts, market trends are pointing towards a "soft landing" scenario for the U.S. economy, with a low likelihood of a Trump victory in the upcoming presidential election. The analysts highlighted that August saw the largest equity fund outflow since 2022, driven by a shift away from retail impulse into equities. While short-term relief is expected from rebalancing flows, the outlook for equities beyond the quarter-end remains uncertain.
The bank stated that recent market patterns are more consistent with a soft landing and a low chance of a Trump win, contrasting with prior Fed rate cut cycles that led to recessions. The potential inversion of the 2s/10s curve, which often signals a recession, was also mentioned but is not expected to materialize for months.
On the political front, JPMorgan analyzed the potential market implications of different election outcomes. A Harris win without a Democratic Congress would lead to limited policy changes with little impact on markets. However, a Trump win with a Republican Congress could result in significant shifts in fiscal, tariff, and immigration policies, potentially increasing inflation risks.
The analysts drew parallels between current market movements and those before the 2016 election, where a Trump victory surprised markets. Despite this, they believe the current trajectory suggests a different outcome, with market patterns indicating anticipation of a Fed rate cut cycle without a recession.
Overall, JPMorgan believes the market is pricing in minimal risk of a Trump win and is expecting steady economic conditions through the next phase of monetary policy changes.
In conclusion, JPMorgan analysts are predicting a soft landing for the U.S. economy and a low chance of a Trump victory in the upcoming election. They believe that current market trends are more consistent with anticipating a Fed rate cut cycle without a recession, providing some reassurance for investors.