A new business cycle begins: Growth prospects unshaken; range of possible long-run inflation outcomes widens

IN BRIEF

• The macroeconomic forecasts underlying our annual asset class assumptions grapple this year with the changes wrought by the global pandemic, the long-term impacts of which are not yet clear. Given that the coronavirus recession depressed economic starting points, we add a small cyclical bonus to most growth projections.

• Our developed market (DM) trend growth rate slips from last year’s, but the overall forecast rises with the inclusion of the cyclical bonus. Relatively advantaged by demographics and technology adoption, the U.S. stands near the top of the growth list while Japan continues to trail

• Emerging market (EM) trend growth edges downward but continues to outpace developed markets as EM productivity and human capital gradually converge with DM levels.

• Long-term inflation projections are little changed this year amid uncertainty in both directions. Significant slack and liquidity trap dynamics risk unanchoring expectations downward while, on the upside, several potential inflation drivers and the easing of decades-long structural drags could swing inflation higher longer term – a rough balance of forces.

Our 2021 assumptions anticipate slow real GDP growth globally, with little change to trend assumptions but small cyclical bonuses applied to several economies

MACROECONOMIC ASSUMPTIONS (%)

Source: J.P. Morgan Asset Management; estimates as of September 30, 2020. Emerging markets aggregate derived from nine-country sample.

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