JPMorgan Asset Management Chief Global Strategist David Kelly Talks Inflation
03:14 Share

Resolve to earn your degree in the new year in the Valley with WGU. WGU is an online accredited university that specializes in personalized learning. With courses available 24/7 and monthly start dates, you can earn your degree on your schedule. You may even be able to graduate sooner than you think by demonstrating mastery of the material you know. Make 2025 the year you focus on your future. Learn more at wgu.edu.

Bloomberg Audio Studios. Podcasts, radio, news. David Kelly of JPMorgan Asset Management joins us now for more. David, welcome to the program. How encouraging is that data this morning?

I don't really think it changes the narrative much. I think, you know, Mike McKee was pointing out that airfares are down 5.4 percent. Actually, lodging, hotels and motels and so forth, was down 4.3 percent. So I think what we're seeing is a lot of softness in the travel industry, which I think is going to get worse over the course of this year. It is the calm before the inflation storm. We're going to get some

higher inflation out of the tariffs. I mean, remember, we left the 10% universal tariff in place. That's a lot higher than anything we've seen really for decades. So that's high. And then, of course, there's enormous tariff on China, which is going to clog supply chains and push up prices, too. So I think we will get some inflation there. But what I actually see in the data, looking particularly at the travel numbers, is a sort of a deflationary tinge to the economy or slowdown tinge to the economy already. So

You know, I'm glad that the market rallied yesterday and I'm glad that we've got rid of the worst of the reciprocal tariffs apart from on China. But I think that we are far from out of the woods here. I think that these data do sort of still suggest that there is a slowdown coming in the economy. So the slowdown is what worries you more than the inflation, David, if I'm hearing you correctly, at a time where CPI just came in, when you strip out energy and food at the lowest level.

going back to 2021. Are you saying that that's really what markets ought to be focused on, both bond and stock? Yes, because people talk about stagflation all the time, but really it's always flation stag. You get the inflation first and then you get the stagnation. And the problem is that with the labor supply falling away, with these impediments to trade

with cutbacks in government spending, government grants and so forth, a lot of fiscal drag this year. I can see a lot of things that are going to slow the economy down. We'll get a temporary surge in inflation from this, but I think we're going to be left with a pretty stagnant economy afterwards. And the real question is, does that revolt in the House yesterday in terms of House members who are fiscal hawks?

Is that really something or not? Are we going to have a bigger deficit in fiscal stimulus next year or not? If we have fiscal stimulus, then I start worrying about inflation again. But in the absence of major fiscal stimulus, I think people need to worry about recession more than inflation here. Are bonds still the best bet? U.S. Treasuries in that type of scenario, recession, comes very much back on the table. Well, yes. First of all, I think long-term interest rates at 4.5%.

3%, 4.2% on a 10-year treasury. I think that's fine. I think people need, you know, I'd be level weight in fixed income. I realize that we may have a mild recession here, but in the longer term, whatever recession we have, we'll pull out of it again. And these bond deals are reasonable for the long run. I don't expect inflation to hang around the long run.

Because, you know, we'll get these tariffs and then, you know, tariffs just don't work and eventually we'll pull back from them and that'll actually have a deflationary impulse in the economy. So long term, I'm not that worried about inflation. I am worried that there won't be much dynamism about the economy overall. David, appreciate the update. I know you're busy this morning, so thanks for making time for us. David Kelly there of J.P. Morgan Asset Management. Resolve to earn your degree in the new year in the Valley with WGU. With

With courses available online 24/7 and monthly start dates, WGU offers maximum flexibility so you can focus on your future. Learn more at wgu.edu.