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J.P. Morgan’s top quant Marko Kolanovic believes the tail risks are diminishing after the July CPI print, which came in weaker than expected.
The stock market surged higher last week in response to the softer CPI print with signs that a peak in inflation has already been seen are growing. For Kolanovic, this reinforces the idea that “Fed hawkishness is likely behind and a soft landing is increasingly likely.”
“The prospect of a recession in Europe is still very much alive, but this should be manageable so long as the US and China are still growing,” Kolanovic told clients in a note yesterday.
JPM’s economists see global inflation falling below 5% in the second half of the year, with the U.S. leading the pack again.
“Confidence that the inflation fever is breaking comes from the alignment of the details of July CPI reports with a broader set of incoming news confirming that two significant inflation impulses are being removed. First, the surge in global oil and agricultural commodity prices has become a near-term disinflationary tailwind. Second, a moderation in core goods price gains,” Kolanovic added.
The strategist has once again reiterated his bullish view on the USD and commodities, with the latter presenting “an opportunity to add exposure.”
