JP Morgan "Global Economic Recovery Next Year Despite Omicron Variant"

Photo by JP Morgan

[Asia Economy Reporter Yujin Cho] JP Morgan, the largest investment bank in the United States, forecasted that despite the spread of the Omicron variant, the global economy will show a full recovery next year. It also predicted that oil prices will continue to soar due to increased demand, reaching up to $125 per barrel.

In its 2022 annual outlook report titled "Laying the Foundation for a More Vibrant Cycle," released on the 8th (local time), JP Morgan anticipated that the COVID-19 pandemic phase could end next year due to the development of treatments and the distribution of vaccines.

With the resumption of economic activities and the resolution of supply-demand imbalances resulting from the development of treatments and expanded vaccine distribution, supply chain disruptions are expected to ease, and movement restrictions will likely return to pre-COVID-19 conditions. In particular, it diagnosed that a strong consumer recovery, driven by labor market improvements and enhanced debt repayment capacity, will trigger the rise in oil prices.

The strong consumer recovery is expected to translate into robust demand for crude oil, with oil price forecasts set at $125 per barrel next year and $150 per barrel in 2023.

Marko Kolanovic, Chief Global Market Strategist and Co-Head of the Research Center, stated, "The Omicron variant, which has driven the market into fear over the past two weeks, signifies the beginning of the end of the COVID-19 pandemic," and projected the S&P 500 index to reach 5050 points next year based on the global economic recovery outlook.

He also predicted that the 10-year U.S. Treasury yield will rise by 2.25%, emerging markets will show recovery comparable to advanced economies, and major emerging market stock indices will surge by an average of 18%. JP Morgan expressed confidence that the economic expansion will continue until the end of next year, but noted that its strength will likely be determined by inflation and monetary policy.

Furthermore, it identified inflation, the Chinese economy, and the transition from pandemic to endemic (temporary endemic disease) as the three key factors the global economy should monitor next year.

Although major advanced countries, including the U.S., will enter a tapering phase, reducing the scale of quantitative easing due to job growth and easing inflation, it is expected that the Federal Reserve (Fed) will not immediately move to raise interest rates after tapering ends. The timing of the Fed's rate hikes is anticipated to be late next year or early 2023.