Stagflation Risk in U.S. Economy

(Reuters) – There is a much higher risk of stagflation than recession in the U.S. economy over the next year. The JPMorgan survey published on Friday indicates that cash is expected to be the top-performing asset class in 2025.

The U.S.-China trade war initiated under former President Donald Trump is perceived as having a significantly negative impact on the U.S. economy.

Three in five respondents anticipate stagnation in U.S. economic growth alongside inflation rates remaining over the 2% target set by the Federal Reserve, with 20% predicting inflation above 3.5%.

There is a general consensus regarding the weakness of the U.S. dollar, with many expecting the euro to reach or exceed $1.11 by year-end which would represent at least an 8% decline for the dollar this year.

JPMorgan noted differences in perspectives between U.S. and global investors regarding the implications of the U.S. regime change.

Yields on the U.S. 10-year note are expected to remain high, with over half of the respondents predicting a benchmark yield of 4.25% or more by the end of 2025.

Nearly half of those surveyed predict that Brent oil prices will stabilize around the current price of $66 per barrel, while 30% foresee a drop to $60 or below.

Additionally, 13% of investors anticipate emerging market equities to outperform compared to only 9% expecting developed stocks to do the same. Fifty-seven percent predict significant outflows from Wall Street stocks this year.

Environmental, Social, and Governance (ESG) investing has fallen out of favor, with only 30% planning to maintain such strategies and 42% showing no interest.

This survey was conducted between April 1-24 and involved 495 investors, as reported by JPMorgan.