JPMorgan analysts have warned that new US trade policies, particularly higher tariffs, have the potential to slow global economic growth and reignite domestic inflation. The bank now projects US economic growth of just 1.3% this year, down from its previous forecast of 2%, while warning of a 40% chance of a recession in the second half of 2025.
JPMorgan calls this a stagflationary drive, a dangerous combination of slow growth and persistent inflation that plagued the US economy in the 1970s. In addition, the slowdown in US growth is expected to weaken the US dollar against other currencies, including emerging markets, as more supportive economic policies abroad emerge.
In its semi-annual research note, JPMorgan also expects demand for US Treasury bonds from foreign investors, the Fed and commercial banks to decline due to the increasing size of the country's debt market. The risk premium (term premium) is expected to increase by 40–50 basis points, although there is no sharp jump in bond yields like in April. 2-year and 10-year bond yields are forecast to be at 3.5% and 4.35% respectively by year-end.
However, even though interest rates are only expected to start to be cut significantly from December until spring 2026, JPMorgan still maintains bullish sentiment on U.S. stocks, mainly supported by the strength of the technology and AI sectors, investment flows from systematic strategies, and buying from active investors during temporary market weakness.
