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”
- “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”
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”
“We continue to look for the Fed to keep rates on hold into 2H24—barring an unexpected recession”
Too early to celebrate.
This article was written by Eamonn Sheridan at www.forexlive.com. Source