(Kitco News) – Even with inflation ticking back up and new policies on the way, the U.S. growth outlook for next year remains robust, and investing in gold and infrastructure equities should help to mitigate risks, according to JPMorgan global head of investment strategy Grace Peters.
“There's no doubt that inflation risks are back on the agenda,” Peters told Bloomberg. “I would say that's flashing an amber light, not a red light to me. But we have seen signs, not just in the rising three-month trajectory of core PCE, but also with consumer inflation expectations rising.”
She said that when assessing the potential impacts on risk assets, inflation cannot be measured in isolation from other factors. “This is about a growth-inflation mix,” she said. “And when we think about the growth trajectory that the next administration is going to inherit, it is very robust. We're seeing 2% to 2.5% U.S. real GDP growth now, and that level could well continue through the next six months, perhaps even the balance of 2025, so we still feel the underlying U.S. economy is pretty strong.”
JPMorgan just published its 2025 outlook, entitled ‘Building on strength,’ and Peters said the goal for next year should be to reinforce strong investment positions while mitigating new and existing risks.
“We've had two years of strong risk asset gains, and therefore the underlying theme that we want to promote is the idea of strengthening portfolio resilience, i.e. aligning to a base case, but also managing for those tail risks […] that include higher inflation, but also the idea that growth may weaken, and will weaken at some point cyclically, as we go through the business cycle.”
Peters was asked how JPMorgan is approaching the U.S. policy environment with the incoming administration, and she cautioned that too much remains unknown to draw any definitive conclusions.
“This all feeds into the idea of what does a resilient portfolio really mean in the regime that we see today?” she said. “The policies are still very unknown. We can start to guesstimate what that might mean for both [growth and inflation]. What it leads us to believe is in strengthening portfolio resilience, you want to still absolutely stay invested. As I mentioned before, we think there is a really solid outlook for growth over the next 12 months, but actually also over the medium term. But inflation risks are there, geopolitical risks are there, risks around the deficit are definitely there, and therefore adding infrastructure, adding gold, as two of our preferred ways to strengthen portfolio resilience, we think is critically important.”
Peters said that on the equity front, JPMorgan is advising clients to broadening out their exposures. “The other underlying theme to us is capital investment, whether it be in the AI transition, whether it be in power and security needs,” she said. “All of this is driving a broadening out of, we think, GDP trends, but critically also within equity markets.”
“So go global, go broad, stay invested, but add insulation from infrastructure and gold.”
