We believe the Fed is willing to tolerate inflation at these levels: JPMorgan's Jacob Manoukian

Summary

Jacob Manoukian, head of U.S. investment strategy at JPMorgan Private Bank, discusses the bond market selloff, Fed policy, and investor positioning. He argues the Fed is willing to tolerate above-target inflation and will likely keep any additional hikes limited, supporting continued equity gains. He also highlights that higher bond yields may reflect stronger growth and recommends balancing core fixed income with inflation protection and real assets.

• The 10-year Treasury yield is only up about five basis points since early August despite global bond selloff attention.
• Higher yields may be sniffing out stronger near-term growth or AI productivity gains rather than just deficit fears.
• JPMorgan Private Bank expects the Fed to tolerate inflation and sees only one or two more hikes over the next 12 months as unlikely to change the regime.
• He says this inflation-overshoot regime gives equity investors a green light for continued rally and earnings growth.
• He recommends balancing core fixed income with inflation protection and real assets.
• The Japan example shows debt reduction via nominal GDP growth can weaken the currency and force FX intervention.