JPMorgan analysts have issued a warning about potential economic challenges facing the United States, predicting a slowdown in growth largely due to U.S. trade policies. They project that global economic growth will be hampered, with a 40% chance of a recession occurring in the latter half of this year. The bank has revised its growth forecast for the U.S. economy down to 1.3% for 2025, a decrease from an earlier estimate of 2%. The increased tariffs are seen as significant factors contributing to this unexpected downturn.
The phenomenon known as stagflation, characterized by stagnant economic growth accompanied by high inflation, was notably experienced in the U.S. during the 1970s. JPMorgan is expressing concern that the current economic climate resembles this difficult period. The financial institution also holds a bearish view on the U.S. dollar, noting that slower growth in the U.S. could diminish its value relative to other currencies, particularly those in emerging markets. Analysts believe that demand for U.S. Treasuries from foreign investors and other domestic market participants may decline due to an expanding U.S. debt market.
Consequently, the term premium required by investors to absorb risks associated with U.S. Treasuries could rise by 40 to 50 basis points over time. However, they do not anticipate sharp increases in Treasury yields like those witnessed in the first half of the year. JPMorgan expects two-year Treasury yields to finish the year at 3.5% and benchmark 10-year yields at 4.35%. With persistent inflation linked to tariffs and a stable economy, the bank projects the Federal Reserve will cut interest rates by 100 basis points starting in December and lasting into the spring of 2026.
In contrast, market expectations indicate smaller rate cuts may occur this year. Despite these concerns, JPMorgan remains optimistic about U.S. stocks, citing robust consumer activity and economic resilience as key indicators. The firm emphasizes that, barring significant policy shifts or geopolitical disturbances, the market’s trajectory looks encouraging, particularly bolstered by technology and AI sectors.