Economic Outlook | Spring 2018

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Text on Screen: J.P. Morgan

Boxed Disclosure: INVESTMENT AND INSURANCE PRODUCTS ARE: • NOT FDIC INSURED • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY • NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED BY, JPMORGAN CHASE BANK, N.A. OR ANY OF ITS AFFILIATES • SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED

On Screen: An opening montage shows a bustling city, a stock market ticker board, and Economist Anthony Chan in front of a white screen.

Text on Screen: Quarterly Economic Outlook with Anthony Chan. The Young at Heart Economy. Spring 2018.

On Screen: Washington, D.C landmarks appear including an American flag waving in front of the U.S. Capitol Building and trees in bloom near the U.S. Treasury Building.

Anthony Chan: The economic expansion will turn 9 years old this June and become the second oldest in U.S. history.

Text on Screen: Anthony Chan, PhD. Chief Economist for Chase.

Text on Screen: "While This Expansion May Be Old In Years, It's Still Young At Heart."

Anthony Chan: But while this expansion may be old in years, it's still young at heart. While it's reasonable to wonder when this aging economy will slow down, here are some important reasons why we don't think a downturn is likely within the next two or even three years.

Anthony Chan: The first indicator is slow wage growth. Although unemployment is hitting record lows, American workers are still not seeing their wages rising very quickly. Wage growth typically needs to reach 4% a year, or higher, before sparking a downturn. Wages are now growing by about 2 1/2% per year even as the economy grows at the fastest rate since 2014.

On Screen: A bar chart labeled "Peak Wage Growth Before Recessions," appears. It shows wage growth peaking at:

  • 6.5% in 1970
  • 6% in 1973
  • 7.7% in 1979
  • 8.8% in 1981
  • 4.4% in 1991
  • 4.1% in 2001
  • 3.9% in 2008
  • 2.5% in 2017

A footnote below the graph reads, “Source: Bureau of Labor Statistics, December 2017.”

Anthony Chan: Another reason is that Americans aren't overburdened with debt. Compared to the size of our economy, total mortgage debt is just 76% of our Gross Domestic Product, compared to more than 100% before the Great Recession of 2008. Even when you add up all the debt Americans owe, including auto loans, credit cards and even personal loans, it's still just 80% of personal income, well below the previous peak seen in 2007.

On Screen: A line graph labeled "Total U.S. Mortgage Debt to GDP/Mortgage Debt as Share of GDP" appears, illustrating Dr. Chan's presentation. A footnote below the graph reads, “Source:U.S. Federal Reserve, December 2017.”

Anthony Chan: So how should investors position their portfolios given the maturing age of the expansion? We believe there is still money to be made in the U.S. stock market.

Text on Screen: "We Believe There Is Still Money To Be Made In The U.S. Stock Market."

Anthony Chan: The American economy shows no sign of slowing down. However, this could be a good time to reposition your portfolio by shifting more of your assets overseas.

Text on screen: "This Could Be A Good Time To Shift More Of Your Assets Overseas."

Anthony Chan: Gradually shifting your portfolio, which could enable you to continue reaping the benefits of the robust U.S. expansion while anticipating future growth in other markets, which are just catching up.

Text on screen: J.P. Morgan.

On Screen: Investing involves market risk, including possible loss of principal, and there is no guarantee that investment objectives will be achieved.

Investments in international or emerging markets can be more volatile and involve a greater degree of risk.

Opinions expressed herein are those of Anthony Chan and may differ from those of other J.P. Morgan employees and affiliates. The information in no way constitutes J.P. Morgan research and should not be trusted as such. Further, the views expressed herein may differ from that contained in J.P. Morgan research reports.

The information and views expressed are not intended to provide specific advice or recommendations for any individual. You should carefully consider your needs and objectives before making any decisions.

For specific guidance on how this information should be applied to your situation, you should consult your Advisor. Investments in international or emerging markets can be more volatile and involve a greater degree of risk.

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