Across the board, there's disinflation in the US economy, and we're heading back to 2%, per JPMorgan.
Following the release of the October Consumer Price Index (CPI) report, yields on two-year Treasuries witnessed a notable decline, while stock futures saw a significant surge.
The report, indicating a slower-than-expected inflation pace, has fueled speculation that interest rates might have reached their peak, opening the possibility of Federal Reserve rate cuts in mid-2024.
Analysts at JPMorgan Asset Management interpret the subdued consumer prices data as a signal that the economy is progressing toward the Federal Reserve's targeted inflation level of 2%. In an interview with Bloomberg TV, they expressed alignment between the CPI report and the bank's expectations, dismissing the notion that the "last mile" to achieve price reduction will pose persistent challenges.
"There’s disinflation across the board in the US economy, and we’re heading back to 2%," stated the analysts.
While acknowledging some segments of the stock market are potentially overvalued, the prospect of low inflation could support lower long-term interest rates, typically favorable for stock prices.
The analysts also highlighted the absence of a "price wage spiral" in the economy, with limited evidence of corporations pushing prices higher or workers pushing for higher wages.
Yesterday, analysts at JPMorgan, including chief strategist Marko Kolanovic, advised investors to divest from bonds and stocks, recommending an allocation to commodities instead.
