JP Morgan speaks out: concerns about stagflation are exaggerated, and the upward trend of US bond yields in the second half of the year is unlikely to continue.

J.P. Morgan's global market strategy team believes that the recent rise in bond yields is unlikely to continue into the second half of this year. They point out that the current market environment is significantly different from the period of turmoil caused by inflation in 2022. The analysts at the firm stated that concerns about a stagflation environment (i.e., economic growth slowing while inflation remains high) appear to be exaggerated. Instead, they highlight that the slowdown in wage growth and weakening pricing power of companies are key factors that will help limit upward pressure on inflation. While prices may still increase in certain areas, J.P. Morgan expects that inflationary pressures will not be as severe as currently reflected in market pricing. The bank also notes that concerns surrounding artificial intelligence and its potential impact on employment have put pressure on sentiment in the labor market, creating another potential force to dampen wage growth and broader inflation trends. In this context, strategists anticipate that government bond yields will stabilize rather than continue to rise. They also view the recent surge in yields following geopolitical conflicts as a temporary phenomenon rather than the beginning of a sustained trend.