JPMorgan: inflation in the US will come to naught by itself

Analysts at JPMorgan investment bank believe that inflation will come to naught by itself as the consequences caused by the coronavirus pandemic disappear. And as inflation declines amid falling oil prices and disruptions in supply chains are eliminated, the stock market will grow.

Representatives of the bank also believe that the US Federal Reserve overreacted to the rise in inflation to the highest in 40 years, raising the rate by 75 basis points at once. Therefore, most likely, there will also be a reversal in the Fed's policy. Nevertheless, the bank's analysts are still concerned that the Fed may raise the rate by 75 bps again at the September meeting. A similar scenario is expected by most market participants. 

The bank believes that strengthening the «hawkish» policy course would be a mistake on the part of the US Federal Reserve, as this could jeopardize the stability of the market. However, in the case of a less sharp rate hike, the US may well expect a «soft landing» of the economy, unlike in Europe, where energy prices continue to rise and inflation remains high.

JPMorgan's medium-term forecast is still more optimistic: inflation in the US will decrease by itself. And if we add here the recovery of the Chinese economy in the second half of the year, the absence of a global recession and a strong «bearish» position among systematic and discretionary investment funds, then the benchmark S&P 500 index may reach 4,800 points by the end of the year. This represents a growth potential of 16% compared to current levels.