JP Morgan's Jamie Dimon offers surprising view on economy

After the Federal Reserve’s zero.5-percentage-point interest-rate reduction last week, many experts say a soft landing for the economy is in store.

Meaning falling inflation without a recession. The Consumer Price Index gained 2.5% in the 365 days through August, the smallest make bigger since February 2021.

The Fed’s favored inflation indicator, the non-public consumption expenditures price index, gained an identical quantity in the 365 days through July. The central bank’s inflation target is 2%.

As for the economy, GDP increased Three% annualized in the second quarter, up from 1.four% in the first quarter. And the Atlanta Fed’s GDP forecasting model predicts a 2.9% expansion for the third quarter.

To make certain, employment growth has slowed, which is what pushed the Fed to slash rates of interest. Nonfarm payrolls climbed 142,000 last month, putting the three-month average at 116,000, the bottom since mid-2020.

But many experts trust Fed rate cuts will counteract that weakness. Rate reductions make a soft landing “very plausible,”  former Fed Gov. Daniel Tarullo, now a professor at Harvard Law School, told Harvard Law In the intervening time.

Jamie Dimon unsure of soppy landing

On the alternative hand, JP Morgan Chase CEO Jamie Dimon injects a note of caution. “With any luck we’re on the attributable to a soft landing. I wouldn’t count my eggs,” he said at a conference last week. “I am slightly more skeptical than folks. I give it lower odds.”

He’s no longer sure that inflation will “go away so without difficulty.” It truly is still above its pre-Covid-19 levels. “We will have long gone from a lower inflation rate to a slightly higher rate,” Dimon said, in step with Bloomberg.

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But that’s no big deal, he maintained. “Down the road, whatever [inflation] is, we’ll take care of it. Economists are used to dealing with that. It’s no longer a disaster.”

Related: Vanguard lays out key investing strategy after Fed rate cut

The veteran economist David Rosenberg appears more worried in regards to the economy than Dimon. “I don’t trust in fairy tales,” he said of a soft landing in an interview with MarketWatch. “The Fed is plagued by a classic case of cognitive dissonance.”

Central bank policy is too tight, Rosenberg said. The Fed’s 50-basis-point move turn into “nothing greater than an acknowledgement that it had stayed too tight for too long,” he said.

All Fed Chairman Jerome Powell did "turn into to sugar-coat the placement. How can he speak about the U.S. economy being solid on the same time he talked about downside risk to the labor market outweighing upside risk to inflation?”

Veteran fund manager: The implications for stocks

JoAnne Feeney, a veteran portfolio manager at Advisors Capital ($eight billion of assets less than management), is more optimistic in regards to the economy. It’s “in pretty good condition,” she wrote in a commentary.

Related: Experts cite stocks to purchase for after Fed rate cut

“While some segments of the income distribution are struggling, and a couple of industries are seeing weak demand, the aggregate picture is still healthy. We're not in a recession, and we don’t see a trigger which could possibly result in 1 anytime soon.”

That has definite implications for stocks, given what is going on to likely be a pair of Fed rate cuts, she said.

Historically, once the Fed starts lowering rates, value stocks tend to outperform growth stocks, and defensive stocks tend to outperform cyclicals. But that has in general occurred when the Fed cut rates into a weak economy, Feeney noted.

Now, rate cuts will benefit companies that desire to borrow. That features small companies, biotechnology companies and tech companies on the complete. Or not it is nice news for these companies’ suppliers too, she said.

More Economic Analysis:

• Jobs report surprise adds to case for bigger Fed interest rate cuts
• Jobs report back to signal timing and size of autumn Fed interest rate cuts
• Fed rate cuts may no longer guarantee a September stock market rally

On the patron side, lower rates may spur increased spending on the entirety from commute and leisure to autos and residential appliances, Feeney said.

She says growth stocks will beat value. Sectors poised to thrive are technology, industrials, healthcare, and consumer discretionary, she said. Laggards will likely include consumer staples and utilities.

Related: Veteran fund manager who as it is going to be forecast stock drop updates outlook