JPM's Misra on the 'Acceleration Narrative' in Markets

Bloomberg

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00:00That's the tough one for you, really, for market participants.

00:02Economists just have to go through one stage, you have to go through two.

00:05Guess the data, then guess how the market responds to it.

00:08So at the moment, and over the past few months,

00:10ever since we got that July payrolls report in August,

00:13things started to look weak, fragile.

00:14Then we had all these revisions, massive step down in payrolls growth.

00:18But the market kept on climbing, both equities and credit pricing in,

00:21a re-acceleration, an expansion.

00:24Do you think maybe that weak data starts to become bad news for this market?

00:28I think weak data is always bad news,

00:30unless the Fed is super aggressive, taking rates to zero or below neutral,

00:35and we're not pricing that in.

00:37So if you get really weak data, I think, you know,

00:40to some extent the re-acceleration is a narrative that's trying to fit price action.

00:45So I look below the hood, and I'm not saying you're doing that.

00:48No, it's all. I can take you, Priya. Carry on, please.

00:50There is a view that we're re-accelerating.

00:52Where in the data do you see the re-acceleration?

00:54So the stock market, credit spreads, I get that.

00:57The stock market, let's look under the hood.

00:59It's really an AI story.

01:01GDP, you strip out AI from investment.

01:04GDP is about zero to 1%, depending on how much you want to strip out AI or how you calculate that.

01:11We're not re-accelerating.

01:13Now, you go out six months, and the one big beautiful bill provides some fiscal stimulus.

01:18And if we get certainty, remember, I know we don't want to talk about tariffs,

01:22but we're still seeing tariff announcements every week.

01:25And so if you get certainty on tariffs, this is the trade deal.

01:29Now, as a company, I can figure out what supply chains are.

01:31Maybe you get that re-acceleration.

01:33So I'm not negative long term.

01:36But right now, we don't see signs of re-acceleration.

01:39We see signs of, you know, soft landing, sub-trend growth is what bond people call it,

01:44where you're growing between 1% and 2%.

01:46And inflation, a big fear after Liberation Day, has not really materialized.

01:51So the Fed is saying, OK, we were worried about those risks.

01:54Now we're looking at the labor market.

01:55Maybe we start to take rates down to neutral.

01:58And that's why I don't think there's a very big disconnect.

02:00I think every market is pricing in this AI structural theme.

02:04And then some cyclical slowdown, which is allowing the Fed to take rates down.

02:09But if you start to see the cyclical side accelerate to your question on,

02:14if you start to see bad news on, you know, we don't have payrolls,

02:18but something or claims or something else,

02:20then I think the market's going to say, OK, maybe this is slowing down.

02:24And what will a couple of rate cuts do?

02:26And what will a couple of rate cuts do?

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