The chief global strategist of JPMorgan Asset Management, David Kelly, is offering his views on the US stock market amid a rally that has seen the S&P 500 index recoup the losses made since the US slapped tariffs on imports on April 2nd.
In a new interview on Bloomberg, Kelly says the recent stock market rally is exaggerated given the near-term and medium-term economic prospects of the US.
“We’ve done a sort of round trip on tariffs here but we still end up with a higher tariff rate than we had at the start. I think we’ve got slower long-term economic growth. So in some ways, the relief rally has been stronger than the downturn and I think it may be a little bit overdone.
So I’d still caution people that in the longer term, the huge premium that US equity prices have over the rest of the world probably isn’t justified…
…I think it’s too early to be really bullish about equities because of fiscal stimulus because you know we’re talking about a full employment economy where the Fed’s going to have less reason to cut.”
According to the JPMorgan strategist, international equities are likely to offer better returns for the foreseeable future relative to US stocks.
“Yes, the US equity market has almost done a round trip year-to-date but European equities are up very strongly. International equities in general are up strongly for the year. And the dollar is down.
I think that will continue because we will still end up with significant tariffs at the end of all of this, even though we’re seeing, you know, it’s coming down. We’re going to end up with higher deficits, we’re going to end up with lower immigration, probably lower economic growth… in the short to medium term.
None of that is really very pro-US. I think the US will do okay. But does it deserve to be at 50% premium over the rest of the world in terms of [price-to-earnings] PE ratio?”
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