In a sentimental mood_2025 Global Economic Outlook

Summary of J.P. Morgan's Global Economic Research Call Industry Overview - Industry: Global Economy - Date: 19 November 2024 - Key Focus: Economic outlook, inflation trends, and potential impacts of U.S. policy changes on global markets Core Points and Arguments 1. Global Economic Resilience: The global economy has shown resilience despite elevated inflation, with nominal GDP growth exceeding 5% and profit margins remaining near historical peaks [2][9][10] 2. U.S. Economic Performance: The U.S. continues to be a significant growth engine, with domestic demand increasing by 3.2% over the past four quarters, outpacing other regions [30][33] 3. Inflation Trends: Core CPI inflation is expected to stabilize around 3%, with a divergence between goods and services inflation anticipated [2][10][56] 4. Central Bank Policies: Central banks are likely to maintain a cautious approach, with limited room for easing due to persistent inflation pressures [2][14][20] 5. Impact of U.S. Elections: A Republican sweep in the upcoming elections could lead to significant policy shifts, including increased tariffs on Chinese goods, which may heighten global economic risks [2][14][15][20] 6. Trade War Implications: The anticipated increase in tariffs on Chinese imports to 60% could result in a negative supply shock, raising inflation and dampening growth globally [15][20][40] 7. China's Economic Outlook: China's GDP forecast has been lowered by 0.8 percentage points due to expected fiscal stimulus and a depreciating yuan, which may lead to intensified deflationary pressures [2][15][25] 8. Sectoral Divergence: The service sector remains the primary driver of global growth, while manufacturing outside the tech sector has shown weakness [2][25][30] 9. Regional Growth Disparities: The U.S. has maintained a significant growth advantage over other regions, with a widening gap in real GDP performance compared to Europe and China [33][51] 10. Behavioral Sentiment: U.S. financial markets are optimistic about potential tax cuts and deregulation, while sentiment in the rest of the world is more cautious due to anticipated trade tensions [43][47] Important but Overlooked Content 1. Potential for Policy Extremes: The risk of more extreme U.S. policies could lead to a broader negative shock to global business sentiment, which is a significant concern for the global expansion [20][21] 2. Asymmetric Central Bank Reactions: Central banks are expected to ease quickly in response to any material threats to growth, but are unlikely to tighten in the face of modest inflation [13][14] 3. Long-term Inflation Psychology: There is a risk that persistent inflation could alter wage and price-setting behavior, complicating central banks' ability to manage inflation expectations [20][56] 4. Euro Area Weakness: The Euro area, particularly Germany, is expected to remain the weakest link in the global outlook, with stagnant GDP growth and rising business caution [51][55] This summary encapsulates the key insights from the J.P. Morgan Global Economic Research call, highlighting the complex interplay of global economic factors and the potential implications of U.S. policy changes on the broader market landscape.