Language

Multilingual content from IBKR

Close Navigation
Learn more about IBKR accounts

Economic Update: May 13, 2024

Posted May 13, 2024 at 10:15 am
J.P. Morgan Asset Management

Growth

The U.S. economy grew 1.6% q/q saar in 1Q24, falling short of expectations for 2.5% growth. That said, weakness at the headline level masked some of the underlying strength in the report. Consumer spending rose 2.5% as spending on services more than offset a decline in goods spending, while the more volatile trade and inventories components detracted from growth. However, real final sales to private domestic purchasers, which exclude these volatile segments, rose by a solid 3.1%. Overall, economic growth should continue to moderate during the balance of this year, although this report likely masks recent economic momentum.

Jobs

The April Jobs report was softer than expected and provided a welcome reassurance that the labor market is not adding to inflationary pressures. Nonfarm payrolls rose by 175K, below expectations of 220K, with a net downward revision of 22K applied to February and March. The economy added jobs to where it needed them the most, such as health care and social assistance while government hiring, which had been a strong source of hiring in the past year, slowed. In the household survey, the labor force was mostly unchanged, and the unemployment rate moved up slightly to 3.9%. Elsewhere, wage growth rose to 0.2% m/m and moderated to 3.9% y/y. This marks the softest y/y increase in wages since June 2021. Overall, the labor market continues to show healthy job growth without renewing concerns about inflation.

Profits

The 1Q24 earnings season is winding down. With 88% of market cap having reported, our current estimate for S&P 500 operating earnings per share (EPS) is $55.29. If realized, this would represent growth of 5.2% y/y and 2.6% q/q. Across sectors, information technology and communication services are expected to have another strong quarter, while resilient consumer demand should support the consumer discretionary sector. Elsewhere, energy, materials and health care are expected to see earnings fall. Revenues, supported by resilient economic activity and solid inflation, are expected to be the largest contributor to operating earnings growth, although margins will play an increasingly important role as momentum slows.

Inflation

The March CPI report came in stronger than expected, with many of the usual suspects driving the bulk of this strength. Headline CPI rose 0.4% m/m and 3.5% y/y, its fastest annual increase since September, while core CPI rose 0.4% m/m and 3.8% y/y. Energy prices rose for a second consecutive month while shelter and auto insurance were up 0.4% m/m and 2.6% m/m, respectively. Similarly, headline and core PCE rose by a hotter than expected 2.7% and 2.8% y/y, respectively. Overall, stalling progress on disinflation limits the likelihood of a Fed rate cut in June, although underlying disinflationary trends should allow inflation to march lower over the course of this year.

Rates

At its May meeting, the FOMC voted to hold rates steady at 5.25%-5.50% for a sixth consecutive meeting and announced a slower pace of quantitative tightening beginning in June. It cut the monthly cap on Treasuries from $60 billion to $25 billion and left the $35 billion cap on agency mortgage-backed securities unchanged. During the press conference, Chairman Powell noted the recent stalling on disinflation progress but maintained his bias toward cutting. The timing of rate cuts will likely depend on the inflation and growth data between now and the June and September meetings.

Risks

  • Stalling progress on disinflation could delay rate cuts, presenting challenges to both stocks and bonds.
  • A slow-moving economy is more vulnerable to any kind of shock.
  • Elevated valuations in some parts of the market may lead to volatility and market corrections.

Investment Themes

  • Fixed income offers attractive levels of income and protection against an economic downturn.
  • Broadening profit leadership and reasonable valuations should present opportunities outside of the Magnificent 7.
  • Long-term growth prospects and improving fundamentals should support international equities.

This weekly update provides a snapshot of changes in the economy and markets and their implications for investors.

Originally Posted May 13, 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.

Join The Conversation

If you have a general question, it may already be covered in our FAQs. If you have an account-specific question or concern, please reach out to Client Services.

Leave a Reply

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.

IBKR Campus Newsletters

This website uses cookies to collect usage information in order to offer a better browsing experience. By browsing this site or by clicking on the "ACCEPT COOKIES" button you accept our Cookie Policy.