Expect the Fed to continue to gradually cut rates, says JPMorgan's Priya Misra

Economic Environment - The current economic environment is characterized by both structural and cyclical challenges, with companies entering the year with strong balance sheets and the ability to innovate despite tariff uncertainties [3][4] - Interest rates are still considered restrictive, prompting discussions about the Federal Reserve's potential rate cuts, with debates surrounding the neutral rate and inflation's transitory nature [4][18] Investment Strategy - A diversified portfolio is recommended, particularly focusing on fixed income, which provides income and diversification benefits amid potential economic slowdowns [5][6] - There is a positive outlook for bond funds, especially in the context of strong corporate balance sheets and the potential for yields in high-grade corporate paper [7][8] Labor Market Dynamics - The labor market is currently in a state of uncertainty, with companies pausing hiring due to tariff-related uncertainties and potential government shutdowns impacting the outlook [9][15] - There are balanced risks in the labor market, with the possibility of both hiring and firing depending on economic conditions and tariff resolutions [12][17] Federal Reserve Actions - The Federal Reserve is expected to continue cutting rates gradually, with current rates around 4.25%, and discussions about reaching a neutral rate between 2.5% and 3.5% [18][19] - The Fed's actions are influenced by the current economic data, which is perceived as murky, and the need for more information to guide future decisions [17][18]