JPMorgan’s David Kelly says current oil and tariff issues are 'temporary'

Summary

• David Kelly asserts that current oil and tariff issues are temporary and will fade over the course of the year.
• He looks past near-term military actions in Iran, expecting an agreement to allow oil to flow from the Persian Gulf, with Iran also exporting, resolving supply constraints.
• U.S. economy has enough momentum to continue growing slowly, but GDP estimates for the year are revised down slightly due to oil price effects and weaker-than-expected refunds.
• Anticipates further stimulus, such as tariff rebate checks or other measures, before the November elections to pump up the economy and ensure strength by the fourth quarter.
• Inflation could peak at 3.5-4% year-over-year by mid-2024 but fall to 2% by year-end, and below 2% next year, driven by lower oil prices, reduced tariffs, and falling shelter costs.
• More dovish than the Federal Reserve, forecasting long-term economic growth capability of only 1.5%, with both growth and inflation below 2% next year.
• Sceptical about an AI productivity boom offsetting demographic challenges, noting the working age population is shrinking.