Growth
2Q24 GDP growth came in at 3.0% q/q saar, well above last quarter’s 1.6%. In the details, consumer spending rose by 2.8% due to a bounce back in spending on goods, while strong nonresidential fixed investment and inventory investment supported impressive business spending growth of 8.3% saar. While the U.S. economy has slowed from its 3.8% pace in 2H23, growth remained solid at 2.3% in 1H24.
Jobs
The September jobs report showed higher-than-expected job gains of 254K, quelling fears of a sharp labor market slowdown. In addition, upward revisions added 72K jobs to the prior two months, and the unemployment rate ticked down to 4.1%. Lastly, wages grew 0.4% m/m (4.0% y/y), likely marking the 17th consecutive month in which wage growth has outpaced inflation. Overall, this report shows that the jobs market is still in good shape.
Profits
The 2Q24 earnings season has come to a close! 2Q24 pro-forma earnings per share (EPS) were $60.55, representing growth of 11.1% y/y and 7.3% q/q. Across sectors, information technology and communication services delivered another quarter of double digit earnings growth, and health care bounced back after a challenging first quarter. Elsewhere, some of the more cyclical sectors, like industrials and materials, saw earnings fall relative to last year. Moving forward, as wage pressures fade and companies focus more on cost management, margins are expected to be the largest contributor to earnings growth.
Inflation
The August CPI report came in as expected, providing further evidence that inflation is on a steady path lower. Headline inflation rose 0.2% m/m and 2.5% y/y, while core inflation rose 0.3% m/m and 3.2% y/y. In the details, food and energy prices were well behaved with energy prices falling by 0.8% m/m. Elsewhere, shelter inflation remained elevated at 0.5% m/m, which alongside a 3.9% m/m increase in airfares, kept core services inflation elevated at 0.5%. Auto insurance prices moderated but rose by a still-warm 0.6% m/m and 16.5% y/y. Moving forward, this should allow the Federal Reserve to remain focused on the labor market.
Rates
At its September meeting, the FOMC voted to lower the federal funds rate by 50bps to a range of 4.75% to 5.00%. In rare fashion, the policy decision was not unanimous, as Michelle Bowman voted in favor of a 25bps cut. During the press conference, Chair Powell struck a cautiously upbeat tone on the economy while acknowledging the risks of a slowing labor market, although he pointed to a broad set of indicators that suggest the labor market still looks solid. In summary, policy normalization has begun, and the pace of rate cuts in the coming months will hinge on the incoming data. While the Fed opted to begin its easing cycle with a larger cut, future rate cuts could be more gradual barring a more material economic slowdown.
Risks
- Geopolitical tensions and the upcoming U.S. election may heighten market volatility.
- A slow-moving economy is more vulnerable to any kind of shock.
- Moderating economic growth could weigh on earnings, leaving markets vulnerable at stretched valuations.
Investment Themes
- Fixed income offers attractive levels of income and protection against an economic downturn.
- Broadening profit growth should continue to support a more inclusive stock market rally.
- Powerful structural and cyclical tailwinds should support select international markets.
—
Originally Posted October 7, 2024 – Economic Update
The Market Insights program provides comprehensive data and commentary on global markets without reference to products. Designed as a tool to help clients understand the markets and support investment decision-making, the program explores the implications of current economic data and changing market conditions.
The J.P. Morgan Asset Management Market Insights and Portfolio Insights programs, as non-independent research, have not been prepared in accordance with legal requirements designed to promote the independence of investment research, nor are they subject to any prohibition on dealing ahead of the dissemination of investment research.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own financial professional, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.
J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide.
Telephone calls and electronic communications may be monitored and/or recorded.
Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our privacy policies at https://www.jpmorgan.com/privacy.
This communication is issued in the United States, by J.P. Morgan Investment Management Inc. or J.P. Morgan Alternative Asset Management, Inc., both regulated by the Securities and Exchange Commission.
If you are a person with a disability and need additional support in viewing the material, please call us at 1-800-343-1113 for assistance.
Copyright 2024 JPMorgan Chase & Co. All rights reserved.
Disclosure: J.P. Morgan Asset Management
Past performance does not guarantee future results.
Diversification does not guarantee investment returns and does not eliminate the risk of loss.
Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.
The price of equity securities may rise or fall because of changes in the broad market or changes in a company’s financial condition, sometimes rapidly or unpredictably. International investing involves a greater degree of risk and increased volatility. There is no guarantee that companies that can issue dividends will declare, continue to pay, or increase dividends. Investments in commodities may have greater volatility than investments in traditional securities, particularly if the instruments involve leverage.
JPMorgan Distribution Services, Inc., member of FINRA.
J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. Those businesses include, but are not limited to, J.P. Morgan Investment Management Inc., Security Capital Research & Management Incorporated and J.P. Morgan Alternative Asset Management, Inc. and JPMorgan Asset Management (Canada) Inc.
Disclosure: Interactive Brokers
Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from J.P. Morgan Asset Management and is being posted with its permission. The views expressed in this material are solely those of the author and/or J.P. Morgan Asset Management and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
