JPMorgan Chase CEO Jamie Dimon remains optimistic about the US economy but cautions against the potential risks of stagflation. Despite high inflation and projections of increasing federal budget deficits, Dimon believes consumers are in good shape and may be able to withstand a recession. However, he warns that if the economy falls into stagflation, things might turn out differently.
The 2024 Kearney Reshoring Index reveals a significant trend towards increased imports of goods made closer to home and a decline in imports from low-cost countries in Asia. The US is now importing less from mainland China and other Asian countries, while domestic manufacturing output remains stable. Nearshored production from Canada and Mexico is also gaining market share, with Mexico becoming the largest exporter to the US, surpassing mainland China for the first time since 2013. Despite challenges such as skilled worker shortages and infrastructure issues, investments in reshoring remain strong, with a growing number of companies considering the US for their manufacturing operations. The US self-sufficiency index (SSI) has also increased, indicating a shift towards buying American goods.
– Equity markets have performed well in Q1 2024, driven by anticipation of a soft landing for the US economy and potential Fed rate cuts.
– The US economy continues to show resilience, with strong consumer spending and low unemployment, but cracks are emerging in areas such as credit card debt and auto loan delinquencies.
– US stocks climbed higher in the quarter, with the S&P 500® Index gaining 10.6%, led by technology stocks, particularly those benefiting from the AI boom, such as NVIDIA.
– Developed market international stocks also had a solid start to the year, with the MSCI EAFE Index up 10% (in local currency), mainly driven by Japan.
– Emerging markets stocks lagged with a 4.3% return, primarily due to China’s continued underperformance.
Oil prices stabilized in Asian trade on Wednesday, following the easing of geopolitical tensions in the Middle East. Industry data indicated an unexpected draw in US inventories, providing some support to crude prices. However, the focus shifted to upcoming economic data, including GDP and inflation figures, which will provide cues on US interest rates and fuel demand. Weakness in the US dollar also supported oil prices by making it cheaper for international buyers.
US business activity slowed in April, with demand weakening across the private sector. Inflation rates eased slightly, but input prices remained elevated. The slowdown is a potential sign of relief as the Federal Reserve continues to raise interest rates to combat inflation.
President Biden’s $7 billion Earth Day scheme to fund residential solar projects has faced criticism for potentially benefiting China. Critics argue that the grants will go against the Inflation Reduction Act, which aims to boost US manufacturing in clean energy. They also note that Chinese-made solar panels are significantly cheaper than their US counterparts, and China produces 80% of global solar panels.
