JP MORGAN CHASE(US:JPM)2025-07-01 00:40Investment Rating - The report maintains a bearish stance on the USD and anticipates the S&P 500 to close near 6,000 by year-end, driven by accelerated earnings growth [10][25]. Core Insights - The interplay of policy uncertainty and business cycle dynamics is crucial, with US trade and fiscal policies being significant drivers of the global business cycle [7][8]. - A substantial shift in US trade policy, with an over 10%-point rise in the effective tariff rate, is expected to generate a broad-based downshift in global growth and a rotation in inflation pressures toward the US [18][45]. - The report places recession risk at an elevated 40%, reflecting concerns around building growth drags and recent declines in global business sentiment [18][54]. Economic Outlook - Global growth is expected to dip to 1.4% in 2H25, down from a potential of 2.2%, marking the weakest performance in over three years [25][52]. - US GDP growth outlook has been lowered from 2.0% to 1.3% for the year, with a one in three chance of slipping into contraction in the coming four quarters [18][59]. - China’s GDP growth forecast stands at 4.8%, reflecting external uncertainties and domestic housing market weaknesses [18]. Market Outlook - The report anticipates a continued rotation into international markets, with USD weakness benefiting international equities [18][21]. - US equities are expected to experience narrow leadership and high market concentration, similar to the 2023-2024 playbook [10][18]. - High-grade credit is viewed positively due to attractive yields, declining net supply, and solid corporate results [10][20]. Commodity Outlook - Oil prices are projected to trade in the low-to-mid $60 range for the remainder of 2025, with a forecasted settlement at $60 in 2026 [24]. - Gold prices are expected to reach an average of $3,675/oz by 4Q25, supported by geopolitical tensions and economic growth concerns [24]. Risk Scenarios - The report outlines three potential scenarios: a higher for longer/incomplete cutting cycle, a sharper slowdown or recession, and a Goldilocks scenario where growth quickly returns to trend [33][35][37]. - The baseline scenario suggests that a moderate macro shock from tariffs could lead to upward pressure on risk assets, while a downside scenario anticipates wider credit spreads and underperformance in low-quality assets [33][35].