A new report from JP Morgan has predicted that GDP growth within the Eurozone will barely outstrip those of the UK and Japan this year, but still lag that of the US and China.
The report, Guide to the Markets, also found that consumer confidence has begun to dip after rebounding from record lows during 2022. After a largely sustained resurgence throughout 2023, confidence dipped markedly at the beginning of 2024, but rose again. However, it seems likely that another dip may be beginning. Even with the 2022 to 2024 resurgence, consumer confidence is painted much lower than at its highest points immediately before and after the pandemic.
In an accompanying note, JP Morgan said that while growth remained resilient, so did inflation.
It wrote: “Growth in the US economy is moderating slightly as some of the fiscal support to households is fading and pent-up savings have been largely exhausted. In contrast, European economies are accelerating as the cost-of-living crisis is fading. With resilient growth, inflation is also proving sticky, but we do not think it will be sufficiently problematic to stop the central banks from easing slowly off the monetary brake.”
When it comes to interest rates, JP Morgan said higher rates over longer periods were conducive to a good environment for bonds.
It wrote: “The journey from ultra low to ‘normal’ interest rates has been painful for fixed income investors. But now that we’re here we think the outlook for fixed income is good. Core bonds once again provide solid income, and with earnings growth expected to be positive, high-quality credit should also prove resilient.”
Looking ahead, JP Morgan said the overall scenario they were looking out was ‘benign’, although it acknowledged that there were wide risks. Tellingly, the firm predicted that current US vice president Kamala Harris would be successful in November’s election, upending previous statistics from only two months ago that had predicted former president Donald Trump at a clear winner.
It added: “Central to these risks are upcoming elections. Whether governments bow to political pressure and deviate from a credible fiscal path is critical to whether these elections upset financial markets.”
