Jamie Dimon, the long-serving JPMorgan Chase CEO and chairman, believes the nation’s economy is about to see a big boom that could last until 2023. He said stimulus savings, huge deficit spending, the infrastructure bill, and more will be the driving force behind the massive growth. However, that doesn’t mean he thinks the U.S. is without its problems. He said the nation, and its people, are under a lot of stress and strain due to the pandemic, racial unrest, the rise of China, and the 2020 election. He said America must first admit it has a problem to fix it and move forward. While that boost is on its way, eyes will slide to the Fed, as it will have more difficulty defending its super-easy policies.
NBC News/Hugh Son, CNBC
JPMorgan Chase CEO Jamie Dimon says economic boom could ‘easily run into 2023’
Jamie Dimon, the long-serving JPMorgan Chase CEO and chairman, sees strong growth ahead for the world’s biggest economy, thanks to the U.S. government’s response to the coronavirus pandemic that has left many consumers flush with savings, according to his annual shareholder letter.
“I have little doubt that with excess savings, new stimulus savings, huge deficit spending, more QE, a new potential infrastructure bill, a successful vaccine and euphoria around the end of the pandemic, the U.S. economy will likely boom,” Dimon said in the letter. “This boom could easily run into 2023 because all the spending could extend well into 2023.”
Dimon, who managed JPMorgan through the 2008 financial crisis, helping create the biggest U.S. bank by assets, pointed out that the magnitude of government spending during the pandemic far exceeds the response to that previous crisis. The longer-term impact of the reopening boom won’t be known until years into the future, he said, because it will take time to ascertain the quality of government spending, including President Joe Biden’s proposed $2 trillion infrastructure bill.
“Spent wisely, it will create more economic opportunity for everyone,” he said.
Read the full story, here.
The Fed could come under fire for easy policy while the economy soars and inflation rises
As the economy booms over the next couple of months, the Fed will have a more difficult time defending its super-easy policies.
Economists expect the second quarter to grow by more than 9%, and the monthly jobs reports are likely to show very strong hiring, with job growth averaging more than 1 million new payrolls in each of the next several months.
Already the reaction to March’s surprisingly strong jobs report could be a sign of more to come. March’s report Friday showed the surge in new jobs to 916,000, nearly 250,000 more than expected.
After the data was released Friday, the fed funds futures market began to immediately bring forward expectations for a Fed rate hike to December 2022, from the spring of 2023.
“Friday took us to the other side,” said Peter Boockvar, chief investment strategist at Bleakley Advisory Group. “That’s a full year ahead of where the [Fed forecasts] are telling us the majority of the committee is. They’re still looking at 2024 as their first hike.”
Jim Caron, head of global macro strategy at Morgan Stanley Investment Management, said the Fed is facing one of its toughest tests ever.
Last year, the Fed moved to a new inflation policy, where it would tolerate a range for inflation, on both sides of its target of 2%. The Fed will have to defend its zero interest rate policy and its bond purchasing program as a whole wave of data shows a big jump in economic activity and inflation, which could rise well above 2%, at least temporarily.
Because of the economic shutdowns a year ago, inflation this spring could look hot when compared to the low base of a year ago. Fed Chairman Jerome Powell has said the Fed expects a transient increase in inflation, but some in the market expect a higher level of inflation based on surging demand and and also government stimulus.
“They’re going to go through the gauntlet now. They’re going to go though the toughest part of the gauntlet in April and May,” Caron said. “The data is going to be good. This quarter is going to test their credibility …The second quarter is going to be plus 10% growth and inflation is going to get to core PCE around 2.5%, and they’re going to say, ‘this is transitory.’”
Read more about the inflation signs ahead, here.
Yahoo! Finance/Brian Sozzi
A ‘significant’ stock market ‘consolidation’ may only be months away: Deutsche Bank
Nothing has been able to shake the new bull market in recent weeks — not a still elevated 10-year Treasury yield or threats of higher taxes on the wealthy and corporations by the Biden administration.
But the one thing that has powered the S&P 500 beyond a record 4,000 — data that indicates a strong post-COVID-19 economic recovery is rapidly building — may turn out to ruin the rally. And it could play out within three months, warns widely followed Deutsche Bank Chief Strategist Binky Chadha.
“Very near term, we expect equities to continue to be well supported by the acceleration in macro growth and see buying by systematic strategies and buybacks driving a grind higher. But we expect a significant consolidation (-6% to -10%) as growth peaks over the next three months,” Chadha wrote in a new research note on Tuesday.
Chadha calls out peaking ISM data — which has been coming in hot of late — as the potential trigger point for a steep market pullback.
“Our house economics forecast implies a flattening out of the ISMs at elevated levels beginning in Q2 (64) and continuing into Q3 (63). There are a number of considerations though that suggest the monthly ISMs peak more sharply over the next three months and slow in keeping with the historical inverted-V-shaped pattern. We look for discretionary investor equity positioning to be pared with a peak in the ISMs and do not expect retail to buy the dip. We then see equities rallying back as our baseline remains for strong growth but only a gradual and modest rise in inflation,” explains Chadha.
Thus far, investors are hardly positioned for any sizable spring/early summer swoon in stocks — with good reason as the economic data has been impressive.
Read more, here.