Inflation Has Peaked and It’s Time to Get Back Into Stocks: JPMorgan

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  • Inflation has already showed signs of peaking, and it’s time for investors to get back into stocks and bonds, according to JPMorgan’s David Kelly.
  • “This is a time to be overweight equities for the long-term investor, and I think bonds are back,” he told Bloomberg TV.
  • Sentiment may be too poor to convince some investors to jump back in, although that’s not reflective of market dynamics, he added.

Inflation has already peaked, and that means it’s time for investors to get back into stocks and bonds, according to JPMorgan Asset Management’s investment chief David Kelly.

Consumer inflation cooled to an annual rate of 8.2% in September from 9.1% in June, which was the highest prices have been in 41 years, and Kelly told Bloomberg TV on Wednesday that he sees the October report due Thursday coming in around 8% and for inflation to drop to around 5% in March of next year.

“Inflation has already peaked. I think it is going to gradually fall,” he said.

He also predicted an 8% long-term gain in US stocks, and more than 10% for European, Japanese, and emerging markets.

“This is a time to be overweight equities for the long-term investor, and I think bonds are back. I think it makes sense to have a slightly below average allocation but a pretty strong allocation to fixed income,” Kelly said.

His forecasts come amid a rough year for markets, which have been wracked by high inflation and the Fed aggressively hiking its policy rate to rein in prices. It’s led some market commentators to sound the alarms for an incoming recession and another stock market crash.

Meanwhile, Kelly also noted that political leanings can skew peoples’ perceptions of the economy. For example, Republicans feel worse about the economy when a Democrat is president, and vice versa.

“Seventy-five percent of Americans believe the economy is in a recession, even though if you talk to any economist and they will tell you that’s not actually true right now. Might be true next year, but it’s not true right now. So how people feel about the economy and what it is actually doing are two completely separate things,” he said.

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