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JPMorgan: Earnings Trump Rate Hikes, For Now
13 Sep
Summary
- Corporate earnings growth could support markets amid higher borrowing costs.
- Inflation concerns rise due to higher oil prices and war in Iran.
- US government debt surpasses $40 trillion for the first time.
JPMorgan analysts anticipate that continued corporate earnings growth will provide essential support for equity markets, even as government borrowing costs and inflation pressures persist. These macroeconomic headwinds, exacerbated by higher oil prices due to the war in Iran, could become more significant.
However, the analysts believe these challenges are unlikely to derail the broader market backdrop, provided that inflation expectations remain anchored. This outlook is distinct from 2022, when central banks' aggressive tightening led to a sustained fall in equity prices.
Rising government bond yields are approaching multi-decade highs, driven by persistent inflation and higher interest rates. The Federal Reserve and European Central Bank are expected to increase rates, further impacting fiscal conditions. Notably, U.S. government debt has now exceeded $40 trillion.
