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To view this email as a web page, click here. FOR THE WEEK OF february 5, 2024 Macro update Strength in the January jobs report combined with other recent macro data points – including an uptick in ISM Manufacturing, consumer confidence and consumer sentiment – suggests the US economy is starting the year with some momentum. We recently boosted our 1Q GDP growth estimate to the 1.5-2% range from 1-1.5%. The number of payrolls added in January came in nearly twice what was expected at 353k. Roughly 90% of the jobs added last month were in the private sector, including 100k in healthcare and social assistance, 74k in professional and business services, 45k in retail trade and 23k in manufacturing. Within the labor report, average hourly earnings growth surprised to the upside at 4.5% year over year, a modest acceleration from the 4.3% pace in the previous three months. While there was likely some noise in the payroll and wage numbers due to seasonal adjustments and severe weather intra-month, it is clear the state of the labor markets remains tight overall with unemployment holding at a low 3.7% and a broader set of sectors adding jobs. The jobs report also backed up Powell’s comments after the Fed meeting earlier in the week that although almost everyone on the FOMC thinks rates should come down this year, the first rate cut is unlikely to come as soon as March. As expected, the FOMC removed its tightening bias, but noted it “does not expect it will be appropriate to reduce the target [Fed Funds] range until it has gained greater confidence that inflation is moving sustainably towards 2%.” We continue to look for rates to first be lowered at the June FOMC meeting. Regarding the Federal Reserve’s balance sheet run off program, otherwise known as quantitative tightening (QT), Powell indicated that the committee had some discussions on the topic at the meeting last week, but that they will have more “in-depth discussions” at the March meeting. We continue to expect an announcement following the next meeting to include slowing the pace of balance sheet run-off. Ultimately this means less liquidity will be removed from the economy than previously expected. Markets update Equities climbed to new all-time highs, led by large cap technology. While the S&P 500 and the Nasdaq are both up a solid 4% year to date, its notable the “Magnificent 7” (Amazon, Apple, Google, Microsoft, Meta, Tesla and Nvidia) are up 9% year to date. Fourth quarter earnings season is underway and roughly 40% of S&P 500 companies have reported results to date. There has been a wide variance of performance with commodity sectors, discretionary and healthcare on the softer end of the range, while technology and communication services have posted stronger results. Overall, fourth quarter revenue growth for companies in the S&P 500 is tracking at 4% year over year, while EPS growth is coming in down 1%. Oil prices are trading roughly at the midpoint of the past two months range. Interestingly, oil prices are down roughly 10% since the onset of the Israel-Hamas war, as there has been little change to underlying global supply and demand balances. The US dollar stands at year-to-date highs as markets more definitively rule out imminent Fed rate cuts and the stronger January jobs report helps support the narrative of US exceptionalism. Interest rates were stable to lower last week following the FOMC’s decision to leave the Fed Funds target range unchanged at 5.25-5.5%. Year to date, yields on the 2yr and 10yr treasury are up modestly as rate cut expectations have been pushed out amid better than expected economic momentum and FOMC commentary. Issuance / M&A volumes Debt capital markets activity began 2024 in similar fashion to the economy – stronger than expected. Across the rating spectrum, issuance levels have been elevated to historical norms. The Investment Grade market priced $194bn of bonds in January, marking the fifth highest month of supply on record, and 49% above the prior January 4y average (ex-2020). January was the most active issuance month for High Yield since November 2021 totaling $32bn; Leveraged Loans gross issuance totaled a January record of $136bn. J.P. Morgan content & research highlights * Is the world economy deglobalizing?; J.P. Morgan Wealth Management Business resources * Managing Corporate Market Risk; Learn how J.P. Morgan’s corporate risk management capabilities spanning foreign exchange (FX), interest rates, commodities and equities can support your business. * Foreign Exchange Budgeting can be an important aspect of a broader risk management strategy. * Prepare for Rising Health Care Costs and learn about Health Plan Funding Options on the market today Chart of the week Labor markets still holding strong overall with solid job additions in recent months and low U-rate Ginger Chambless Head of Research, JPMorgan Chase Commercial Banking Ask me questions | Subscribe to my updates | Explore J.P. Morgan Markets Unsubscribe | Privacy Policy | Website ©2024 JPMorgan Chase & Co. All rights reserved. JPMorgan Chase Bank, N.A. Member FDIC. Deposits held in non-U.S. branches are not FDIC insured. Chase, J.P. Morgan, JPMorgan and JPMorgan Chase are marketing names for certain businesses of JPMorgan Chase & Co. and its subsidiaries worldwide (collectively, “JPMC”). Visit jpmorgan.com/cb-disclaimer for full disclosures and disclaimers related to this content. The material contained herein is intended as general market commentary. To the extent indices have been used in this commentary, please note that it is not possible to invest directly in an index. The views, opinions, estimates and strategies, as the case may be (“views”), expressed herein are those of Virginia Chambless and/or the other respective authors and speakers named in this piece and may differ from those of other JPMC employees and affiliates. These views are often based on current market conditions and are subject to change without notice. Any examples used are generic, hypothetical and for illustration purposes only. This information in no way constitutes J.P. Morgan research and should not be treated as such. Further, the views expressed herein may differ from that contained in J.P. Morgan research reports. The above summary/prices/quotes/statistics have been obtained from sources deemed to be reliable, but we do not guarantee their accuracy or completeness. JPMorgan Chase, 10 S. Dearborn, Mail Code: IL1-0723, Commercial Banking Marketing, Chicago, IL 60603-3403, United States.