1Q21 real GDP grew at a 6.4% q/q seasonally adjusted annual rate. Increases were broad based, with the exception of trade and inventories. Personal consumption, the largest part of the economy, surged an annualized 10.7%, the second-fastest pace since the 1960s. Economic output is now only 0.9% below peak 4Q19 real GDP, and an inventory rebound could set the stage for a double-digit surge in real GDP in the second quarter. Recent U.S. economic data have also shown that U.S. growth is set to surge, with a very bullish ISM Manufacturing PMI at 64.7%, a 37-year high, and the ISM Services PMI at an all-time high of 63.7. Markit Flash PMIs for April also rose to record levels, 63.1 for services and 60.6 for manufacturing.
The March Jobs report was much stronger than expected and suggests an even more powerful recovery than implied by the Fed’s recently upgraded outlooks. Non-farm payrolls rose 916,000 in March, well ahead of a consensus expectation of +658,000. With these job gains, the U.S. has now recovered 14.0 million, or 62%, of the 22.4 million jobs lost in the pandemic. The unemployment rate fell to 6.0% from 6.2%, in line with consensus expectations, and the labor force rose by 347,000 in March, showing a continued decline in pandemic effects on the labor market. Initial jobless claims for the week ended April 24 fell to 553k (cons. 540k), the lowest level since the onslaught of the pandemic.
The 1Q21 earnings season has been impressive, with 286 companies having reported (72.6% of market cap). Our current estimate for 1Q21 earnings is $45.78. Thus far, 86% of companies have beaten on EPS estimates, and 73% have beaten on revenue estimates. Many companies have now recovered to the revenue/EPS levels of 2019 and are setting fresh highs. Blowout reports from big tech also highlight how the pandemic has accelerated key secular growth themes. Oil prices (+48% y/y) and the U.S. dollar (-7% y/y) have provided additional tailwinds to earnings. However, elevated expectations and valuations have caused market recovery plays to pause, awaiting new catalysts.
Inflation has now reached the FOMC’s 2% target, as the headline PCE price index rose +0.5% m/m and +2.3% y/y in March. The core PCE deflator also accelerated to +0.4% m/m and +1.8% y/y, matching market expectations. Headline CPI for March was a little stronger than expected, rising +0.6% m/m and +2.6% y/y, while core inflation rose +0.6% m/m and +1.6% y/y. Energy was a main contributor to higher inflation, as prices rose +5.0% m/m.
The FOMC maintained the federal funds target rate in a range of 0.00%-0.25% and left the pace of asset purchases unchanged. In addition, the median federal funds rate outlook—as measured by the “dot plot”—continues to imply no rate adjustments through 2023. Chairman Powell pushed back on tapering chatter and reiterated their view that higher inflation over the next few months will be transitory and thus not meet the threshold for tighter policy. Powell acknowledged the improved growth backdrop, but said that they will need to see it persists to give the Fed comfort about achieving “substantial progress.” The Fed also continued to underscore “risks to the outlook” from the coronavirus pandemic.
- The emergence of COVID-19 variants and vaccine delays could slow the economic reopening.
- Inflation could spike in the medium term.
- Rising yields could foment equity market volatility.
- U.S. equity investors can benefit from the recovery with cyclical exposure.
- Fixed income investors may underweight bonds and maintain short duration in a rising rate environment.
- Long-term growth prospects and cyclicality support international equities.
Originally Posted on May 3, 2021
This website is a general communication being provided for informational purposes only. It is educational in nature and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purposes. By receiving this communication you agree with the intended purpose described above. Any examples used in this material are generic, hypothetical and for illustration purposes only. None of J.P. Morgan Asset Management, its affiliates or representatives is suggesting that the recipient or any other person take a specific course of action or any action at all. Communications such as this are not impartial and are provided in connection with the advertising and marketing of products and services. Prior to making any investment or financial decisions, an investor should seek individualized advice from personal financial, legal, tax and other professionals that take into account all of the particular facts and circumstances of an investor’s own situation.
Opinions and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. The views and strategies described may not be suitable for all investors.
INFORMATION REGARDING MUTUAL FUNDS/ETF:
Investors should carefully consider the investment objectives and risks as well as charges and expenses of a mutual fund or ETF before investing. The summary and full prospectuses contain this and other information about the mutual fund or ETF and should be read carefully before investing. To obtain a prospectus for Mutual Funds: Contact JPMorgan Distribution Services, Inc. at 1-800-480-4111. Exchange Traded Funds: Call 1-844-4JPM-ETF.
J.P. Morgan Funds and J.P. Morgan ETFs are distributed by JPMorgan Distribution Services, Inc., which is an affiliate of JPMorgan Chase & Co. Affiliates of JPMorgan Chase & Co. receive fees for providing various services to the funds. JPMorgan Distribution Services, Inc. is a member of FINRA FINRA’s BrokerCheck
INFORMATION REGARDING COMMINGLED FUNDS:
For additional information regarding the Commingled Pension Trust Funds of JPMorgan Chase Bank, N.A., please contact your J.P. Morgan Asset Management representative.
The Commingled Pension Trust Funds of JPMorgan Chase Bank N.A. are collective trust funds established and maintained by JPMorgan Chase Bank, N.A. under a declaration of trust. The funds are not required to file a prospectus or registration statement with the SEC, and accordingly, neither is available. The funds are available only to certain qualified retirement plans and governmental plans and is not offered to the general public. Units of the funds are not bank deposits and are not insured or guaranteed by any bank, government entity, the FDIC or any other type of deposit insurance. You should carefully consider the investment objectives, risk, charges, and expenses of the fund before investing.
INFORMATION FOR ALL SITE USERS:
J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide.
NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE
Telephone calls and electronic communications may be monitored and/or recorded.
Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our privacy policies at https://www.jpmorgan.com/privacy.
If you are a person with a disability and need additional support in viewing the material, please call us at 1-800-343-1113 for assistance.
Copyright © 2021 JPMorgan Chase & Co., All rights reserved
Disclosure: J.P. Morgan
Past performance does not guarantee future results.
Diversification does not guarantee investment returns and does not eliminate the risk of loss.
Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.
The price of equity securities may rise or fall because of changes in the broad market or changes in a company’s financial condition, sometimes rapidly or unpredictably. International investing involves a greater degree of risk and increased volatility. There is no guarantee that companies that can issue dividends will declare, continue to pay, or increase dividends. Investments in commodities may have greater volatility than investments in traditional securities, particularly if the instruments involve leverage.
JPMorgan Distribution Services, Inc., member of FINRA.
J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. Those businesses include, but are not limited to, J.P. Morgan Investment Management Inc., Security Capital Research & Management Incorporated and J.P. Morgan Alternative Asset Management, Inc. and JPMorgan Asset Management (Canada) Inc.
Disclosure: Interactive Brokers
Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from J.P. Morgan and is being posted with permission from J.P. Morgan. The views expressed in this material are solely those of the author and/or J.P. Morgan and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Disclosure: Futures Trading
Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.