JPM: Downward GDP Revision On Tighter Fin Conditions

JPM has lowered its expectations for US growth "due to the tightening in financial conditions that has occurred in recent months" due to the Fed's policy shift.

• They now see 2.4% GDP growth in H222 (3.0% prior), 1.5% in 1H 23 (2.1% prior), and 1.0% in 2H23 (1.4% prior). Alongside this, they see the unemployment rate at 3.5% in 2H23, vs 3.2% prior (and 3.6% observed in April's payrolls report).
• They cite the 10% rise in the real trade-weighted USD, the $5T reduction in household wealth so far this year (via equity/bond weakness), and the 200+bp in mortgage rates as weighing on growth.
• JPM says their forecast implies a "soft landing", though if growth is set to exceed their forecast, the Fed would respond with additional tightening; they see the Fed's response in the event of a worse-than-JPM-expects economic performance as "less clear and would likely depend largely on inflation pressures".