JPMorgan Chase is reportedly changing its forecast for incoming rate cuts from the Federal Reserve as fears that the US is heading toward a recession grip global markets.
A series of weaker-than-expected reports on the US economy, including a bleak jobs report, triggered a stock market retreat on Friday.
Amid growing fears that the US may not engineer a soft landing, JPMorgan says it now believes the Fed will cut rates by 100 basis points in a two-month time span, reports CNBC’s Carl Quintanilla.
Says JPMorgan,
“Had the Fed had this [jobs] report in hand going into the FOMC meeting this past Wednesday, it almost certainly would have cut the policy rate by at least 25 basis points.
Now that it looks to be materially behind the curve, we expect a 50bp cut at the September meeting, followed by another 50bp cut in November.”
JPMorgan’s shift highlights a rapid change in market sentiment. Investment strategist at Global X Management, Billy Leung, tells Bloomberg that investors’ outlooks have deteriorated rapidly.
“The narrative is changing quickly after a confirmation of the FOMC’s September rate-cut path.
As manufacturing and jobs data are pointing toward recession levels, investors are now questioning whether the Fed is cutting too late.”
The retreat in equities was especially notable across Asia on Friday, with indicators suggesting Japanese markets had their worst day since 2016.
The Nasdaq dropped 2.43%, closing at 16,776. That represents a 10% drop from recent highs.
Meanwhile, the Dow fell 610.71 points, or 1.51%, closing at 39,737.26. At its session low, the Dow was down 989 points.
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