How have our views played out in 2024?

Summer means warmer weather and longer days, but it also means that Mid-Year Outlook season is here.

Let’s start with what has gone our way:

• We thought inflation would keep trending lower. Indeed, Core PCE inflation has cooled from a 3.2% year-over-year pace when we published the year-ahead outlook to a 2.75% pace last week.
• We thought the Federal Reserve would cut rates in the second half of the year. This still looks likely to be the case. Market expectations are moving back and forth between rate cuts starting in September or December, but the Fed is waiting for the inflation data to offer more confidence in making a move.
• We thought stocks were in a sweet spot. Since our publication in December, global equities have rallied about 15%. We saw stocks entering a sweet spot that positioned them to act as both a driver of long-term growth and an inflation hedge in portfolios

Now, what hasn’t worked:

• We thought fixed income looked to be more competitive with stocks. With volatility, recession risk and rate cuts in mind, we believed it was time for investors to lock in yields to generate not only income, but also add defensiveness in the event of a recession.
• What actually happened: Yields on 10-year Treasuries have climbed about 50 basis points as of last week. Growth has surprised to the upside, remaining above trend in the face of higher rates. Inflation has been stickier than anticipated. Many segments of fixed income now outyield cash

What we’re excited about:

Nearly halfway through the year, we continue to see a diverse set of opportunities for investors. While there are many things to be excited about, you can probably guess what takes the cake: AI.

Over the past six months, we’ve seen AI prove that its hype is real. Near-term, the AI revolution has already meaningfully impacted corporate behavior, investment and earnings: 50% of the S&P 500’s market cap has mentioned AI on earnings calls, although less than 5% of U.S. firms are actively using the technology. To us, this means there could be a long runway for adoption ahead.

As we look to the road ahead, we are constructive despite the risks posed by fragilities such as the U.S. election or geopolitical events. The Mid-Year Outlook marks a checkpoint on a longer investment journey. While nothing is certain, ensuring that your portfolio is aligned with your long-term plan is likely the best way to prepare for the future.

Rick Barragan is the Managing Director,
Los Angeles Market Manager, for J.P. Morgan Private Bank.
[email protected] | (310) 860-3658
privatebank.jpmorgan.com/los-angeles

Source: J.P. Morgan Private Bank Insights, June 7, 2024. “How have our views played out in 2024?” By Sarah Stillpass and Alan Wynne, Global Investment Strategists, J.P. Morgan Private Bank.